Circuit City Stores, Inc. (NYSE: CC) is an awful business right now, and a big shareholder of the retailer wants Chairman and CEO Philip Schoonover to get the heck out. According to The Wall Street Journal (subscription required), Wattles Capital Management LLC owns 6.5% of Circuit City, and it's getting pretty tired of the CEO's dismal performance.

Bravo to Wattles -- it irks me when chief executives who aren't up to par remain at the helm of the ship. Regular, small-time investors really have no say in anything -- but the big-guy activists can throw their weight around and enter into proxy battles to keep the pressure on management. I completely agree with Wattles and its reasoning regarding the current state of Circuit City, and I hope its efforts will pull the retailer in a new direction and inspire fresh, shareholder-value-enhancing strategies. Easier said than done, of course, but with Circuit City's stock currently stuck below $5 a share, management needs some outside influence.

Circuit City is having a tough time against competitors like Wal-Mart Stores, Inc. (NYSE: WMT) and Best Buy Co., Inc. (NYSE: BBY); its brand equity is definitely suffering. As far as investing in Circuit City goes, it's not even a tiny blip on my radar at the moment; I'll have to wait and see how a turnaround -- if it is genuinely forthcoming -- evolves.

Disclosure: I don't own shares in any of the companies mentioned here; positions can change at any time.

Circuit City (NYSE: CC), the second-largest consumer electronics retailer in the U.S., has named John T. Harlow as Chief Operating Officer at a time when the retailer is in one of the worst funks of its life. CEO Phil Schoonover is reportedly on his way out the door as Circuit City's sales plummet every month and quarter.

So, why a new COO now? Because something -- anything -- is needed to shake up the company and get it back on track to consistent profits (or even smaller losses) as 2008 gets under way.

The news for Circuit City Stores, Inc. (NYSE: CC) just continues to get worse and worse and worse. From multiple disappointing quarters in 2007 to lackluster December 2007 sales to general malaise within the company, Circuit City lost a pretty influential fan Friday. TCW Group Inc., which was the consumer electronics retailer's largest shareholder, went from a 10.9% stake to a 0.2% stake.

No longer is TCW Circuit City's largest shareholder, having shed roughly 18 million shares to slice its holdings from 18.3 million shares down to just over 310,000. Could Circuit City possibly have anything worse happen? Probably not. Could it have anything good happen?

Sure -- toss CEO Phil Schoonover and sell the company to a private equity group. You know, someone that can light a fire under the company again and bring it back from the dead. It's still existing, but that's about it. Employee morale can't be high and is probably declining in larger amounts than Circuit City's share price and quarterly sales.

Since TCW isn't talking about its reasoning for dumping so many Circuit City shares, one has to surmise that the retailer's former largest institutional investor sees little to no future for the company in its current state. With competitor Best Buy, Inc. (NYSE: BBY) literally eating Circuit City's lunch these days, some kind of even is bound for the next 30-45 days. It's about time, and if you hold CC shares, let's hope it's not too late when the changes occur.

In today's Wall Street Journal, Herb Greenberg picks Circuit City Stores' (NYSE: CC) CEO Philip Schoonover as the worst of 2008. He also includes Sears Holdings (NYSE: SHLD) CEO Aylwin Lewis in that mix.

It's an interesting coincidence to me. On Monday I appeared on CNBC to discuss my picks for the three best and worst CEOs of 2007. Two of my worst CEOs were Schoonover and Eddie Lampert of Sears. I agreed with Greenberg's pick of Lampert as the worst CEO of 2007 and even though Lampert -- who reportedly gets deeply involved in operational decisions -- is not a CEO, but chairman. Lampert underinvested in Sears' stores -- he spent $1.33 a square foot, which is 20% of what its peers spend -- and its stock fell 39% in the last 52 weeks.

But in my mind Schoonover is significantly worse. His 3,400 person headcount cut in March 2007 actually helped out Circuit City's competitor in a very direct way. That's because customers who buy electronics value the expertise of the sales staff. And in canning those highly paid sales people through what Schoonover called "transformation work," he freed those salespeople and their customers to take their business to Best Buy (NYSE: BBY). As I pointed out, in my post, this "transformation work" helped Circuit City's sales decline by 3.1% while Best Buy beat revenue and profit growth expectations.

MoneyCNN reports that Circuit City Stores (NYSE: CC) lost 64 cents a share and a sales dropped 3.1%. Circuit City CEO Philip Schoonover said: "We underestimated the financial impact from the disruption of our transformation work."

Schoonover is clueless about his "transformation work." As I posted earlier this year, last March Circuit City laid off 3,400 workers experienced and higher paid workers and replaced them with lower paid ones. Customers who liked the knowledgeable sales staff followed them to Best Buy (NYSE: BBY) which reported that its third quarter profits and sales beat estimates.

Schoonover thought that he could lower his costs and keep sales strong. Now it's time for Circuit City's board to complete its "transformation work" by canning Schoonover.

Update: Circuit City stock is down 22% this morning and 73% since March when it announced its 3,400 person lay off.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Best Buy or Circuit City securities.

When Circuit City Stores (NYSE: CC) shocked the retail world a few months ago by stating it would effectively fire 3,400 higher-paid employees and replace them with lower-paid employees, most of us were slightly aghast. After all, this kind of brutal honesty was not what the industry was used to. It also exposed Circuit City management as incompetent spendthrifts. Cutting costs is one thing, but messing with long-term employees in a fashion like this can completely destroy employee morale and make nobody want to be employed by your organization.

Now, capitalistic economies survive by openness and competition, and Circuit City was free to make this decision. There is no law against it. At the same time, one large misstep (like many smaller ones) can completely ruin a company. I'm not sure that is happening to Circuit City yet, but there are some signs this may be happening. In standard and deplorable fashion, Circuit City CEO Philip Schoonover is taking home huge compensation amounts while the company he leads sucks the marrow from its own existence. Since this ground has been covered many times, I'll move on.

Circuit City's admission that it saw the first quarterly sales drop in over three years should be a huge wake-up call to its management and especially the board. If the board is supposed to be the guiding light behind large company decisions, this one is on life support. Did the effect of all those firings in recent months help Circuit City see a huge sales drop in its more recent quarter? If those two factors can ever be correlated, then it will show what many of us are already thinking -- human talent, although thought to be expendable, can make or break you.

In the face of hard times, consumer electronics retailer Circuit City (NYSE:CC) continues to bump along the road of thin margins and sales disappointments (save for December results), as the chain will be rolling out newer and smaller stores this summer that will showcase consumer-friendly innovations.

What is Circuit City trying to do here? Why, build a relationship with the customer as tightly as possible, of course. The retailing of consumer electronics, from many perspectives, reached a commodity plateau years ago and the two larger chains in the U.S. -- Best Buy and Circuit City -- have re-engineered pieces of their business to try and stem the tide of lost sales and declining margins with newer products now on the downward slope of the product cycle (read: cheaper prices and lower margins).

Circuit City's latest attempt to gain back what it can will be built on in-store kiosks that enable "real-time" chats between customers and the retailer's Firedog technology support staff, in addition to overall smaller stores. The 200 to 300 stores that are planned for 2007 and 2008 will be significantly smaller than existing stores, according to Circuit City executive officials in an announcement yesterday. For a chain that launches perhaps 10 to 12 new stores a year, there may be quite a few more Circuit City stores in your area in the next 24 months.