In the world of business, when a company shows less-than-expected growth, declining sales or even a colossal misstep, someone has to pay. In many cases, the sacrificial lamb comes in the form of a company’s CEO — the move is usually an attempt to please shareholders and hold someone publicly accountable for what’s going on. Other times, though, shareholders are able to dig a bit deeper and hand responsibility to CEOs to clean house. When this happens, the axe will fall on lower-ranking executives.
Previously, we’ve taken a look at problems with executive compensation models and even CEOs who should think about returning their bonus checks. While these are two factors that can weigh down businesses, a lot of times there is internal strife, criminal wrongdoing or simple incompetence to blame for weak performance. These things can spread responsibility around a company, causing investigations and mass firings of not just low-ranking employees but of executives with a lot of standing and clout.
There are several examples of executive teams taking the fall for their companies, and several high-profile cases that have happened very recently. They span industries, occur in companies big and small, and cross international borders. Each case serves as a warning to employees of all rank that their job is not always secure, no matter how far up the ladder they’ve made it.
Read on to see six examples of companies that have recently placed members of their executive teams under the guillotine.
1. General Motors (NYSE:GM)
It’s been an incredibly rough year for General Motors. The company has issued numerous recalls within just the first half of 2014 concerning millions of its vehicles. The most egregious, of course, concerns the malfunctioning ignition switch in many of the company’s cars that have led to as many as 54 crashes and 13 deaths, according to Fox News. CEO Mary Barra was hauled in front of a congressional hearing in order to explain what exactly went wrong but was unable to offer up much other than an apology.
Last week is when the fallout started to hit the ranks of GM’s executives. Fifteen were fired after it was found that they were responsible for handling the issues when they were first sniffed out; five more faced disciplinary action. The Washington Post reports that investigations did not find evidence that General Motors attempted to cover up its mistakes, but rather, cultural problems within the company itself. Oftentimes executives would meet to discuss issues with their product then do nothing to stop it, reports claim.
If there’s one way to lose the faith of regulators and the public at large, its failing to act on an issue so large and deadly. In GM’s case, the 15 who were fired earned their spot under the employment guillotine.
2. AOL (NYSE:AOL)
AOL is a company that many people would be shocked to learn is still around. After seeing how the company’s CEO deals with internal shakeups, it might become even more surprising. Last summer, company CEO Tim Armstrong demonstrated what could possibly be the worst way to fire a member of his team, opting to bring down the hammer on employee Abel Lenz on a conference call with more than 1,000 participants, ABC News reports.
Lenz was the creative director of AOL’s Patch network, a series of locally based news sites dedicated to communities around the country. The sites were struggling and experienced mass layoffs, then were eventually sold and made profitable by a new owner earlier this year. The manner in which Armstrong saw fit to axe one of his employees in such a public manner, though, is something the CEO hasn’t been able to shake.
Armstrong issued an apology for the brazen way in which he let go of Lenz, but it still goes to show that when things aren’t going well, even higher-ups in huge companies aren’t shielded from firings.
3. Yahoo (NASDAQ:YHOO)
Going up against the likes of Google (NASDAQ:GOOG) and Microsoft’s (NASDAQ:MSFT) Bing is perhaps one of the most formidable tasks in the business world. Yet somehow, Yahoo has been able to hold its own for the time being and retain its spot among the world’s highest-trafficked sites. One of the company’s top executives was not able to deliver the results CEO Marissa Mayer was hoping to see, though, and was subsequently sent packing early this year.
Yahoo Chief Operating Officer Henrique de Castro was sent on his way after a mere 14-month stint on the job. Bloomberg says that de Castro and Mayer had a rocky relationship, and ultimately, de Castro’s inability to increase growth was the deciding factor. Yahoo saw revenues drop by 1 percent in 2013, adding fuel to the fire. Not everyone saw the move as a positive, as S&P Capital IQ analyst Scott Kessler explained to Bloomberg.
“This is a negative for Yahoo,” he said. “This is someone who had a tremendous amount of responsibility. Now, there’s a hole in the executive team.”
It appears that it’s a hole that Mayer was willing to live with for a time and proves that no one is really safe from the chopping block.
4. Pilot Flying J
In another recent exhibition of force against a company’s executive team, the CEO of gas station and convenience store chain Pilot Flying J has let go of several execs. According to Cleveland’s ABC News affiliate, the company is under federal criminal investigation surrounding diesel fuel rebate fraud. So far, 10 of the company’s former employees have pleaded guilty and agreed to cooperate with investigators.
The latest executive firings saw the company release its vice president of national accounts, Scott Wombold; company president Mark Hazelwood was also sent packing. Their firings came a year after the FBI went so far as to raid the company’s headquarters, the agency accusing it of manipulating purchase records and cheating trucking companies. USA Today reports that the company is the seventh-largest private employer in the United States, with more than 20,000 employees.
Its unclear how things will shape up for Pilot Flying J after investigations are completed, but its executive team has so far faced the brunt of the pushback.
5. Chesapeake Energy (NYSE:CHK)
The world of energy is a high-stakes affair. Last summer, four Chesapeake Energy executives learned that the hard way. CEO Doug Lawler decided to clean house in August, leading to the firings of four high-level execs, including the company’s COO as well as the executive vice president of production. Lawler’s decisions were based on an overall restructuring plan in efforts to reduce costs and save the company money.
The Oklahoman reports that Lawler was quick to praise the performance of the executives he let go, although it didn’t seem enough to save their jobs.
“Chesapeake had an outstanding quarter, and we continue to show good production growth. These individuals all played a significant part in that. When you look at the history of the company, those four individuals have played a key role,” Lawler said, per that publication.
Even in a business that rakes in as much cash as energy does, inflated executive salaries are not immune to being shaved off to save companies money and and increase profitability.
6. Citi (NYSE:C)
Life is usually pretty good for bankers — until you get involved with fraud in foreign countries. Citi issued pink slips to 11 employees in Mexico recently, including four high-ranking executives. The New York Times says the firings came after the company’s board was briefed on a investigation into a $400 million fraud surrounding Citi client Banamex. Some were fired, as they did not take the necessary steps to detect wrongdoing, or ignored warning signs.
Fraud has plagued the banking industry for as long as it has existed, but after the recent financial crisis, banks have been under the microscope more so than ever before. While the recent happenings in Mexico are one simple instance, many blame the banking world’s culture as a whole for fostering the behavior. Jonathan R. Macey, a professor at Yale Law School, told The New York Times that this kind of behavior strikes at the heart of what the business is all about.
“This is a large number of people being fired for cause,” he said to the newspaper. “But this kind of crime is at the core of the bank’s business.”
Banks face an uphill battle in repairing their image, and Citi looks set on trying to keep its hands clean. If CEOs and shareholders want their teams to put the company in a positive light, weeding out problem employees, including execs, is a solid approach.