Global Crisis   Blog

Tale of 20 Losers: A Massive Failure of Leadership

By Shlomo Maital

Nov. 16/2009

      Fortune magazine publishes annually the Global 500,  a listing of the world’s 500 largest companies.  In 2008,  20 large companies (those with the dubious distinction of making the 20 Largest Losers list)  lost a massive amount of money:  $320 b. in total. (To reach that sum, Israel’s 7.2 million inhabitants would have to work for two entire years).  

Fannie Mae $58.7,  RBS $43.2, GM $30.9, Citigroup $27.7, UBS $19.3, Conoco $17 , Ford $14.7 ,  HBOS $13.8, Time Warner $13.4,  Pemex $10, Delta $8.9, Hypo $8, Hitachi $7.8, Alcatel $7.6, Credit Suisse $7.6, Bayern $7.4, Lyondell $7.3, Flextronics $6.1, Mizuho $5.9, Deutsche Bank $5.9

     Not all were banks or financial services companies.  Some were manufacturing companies, media, telecom, airlines, even oil companies!   All reflected a massive failure of CEO leadership.    

    What is the common thread uniting all of these losers — if there is one?  I believe it is the utter failure of their Boards of Directors  and CEO’s to think independently, and daily, to challenge what they were doing and how they were doing it.  Some CEO’s, like Citigroup’s, seemed unaware of their organization’s huge exposure to risk. 

      There were those that did resist the ‘herd’.  The CEO of Canadia’s Toronto Dominion Bank kept his bank out of the sub-prime mortgage market, while other huge banks like Citigroup were being swept to disaster.    

     Does your organization have leadership that thinks independently, evaluates evidence on its own, and constantly challenges the prevailing herd thinking?    Does your Board of Directors contribute to this,  and is it part of the problem (complacently rubber-stamping whatever the senior management says)?    

    If your answers are “NO”,  and “YES” —    prepare yourself to join Fortune Global 500’s list of losers in the future — perhaps, the near future.   

———–

   In the Tables below, I provide an analysis of the 20 Largest Global Losers in 2008:

 Table 1.   Industries Represented in the 20 Largest Losers

Banks & Financial Services (9 companies);  Manufacturing (3); Automobiles (2);  Oil Companies (2); Telecom Infrastructure (1); Media (1); Airlines (1); Real Estate Holding (1).

  Table 2.  Countries Represented in the 20 Largest Losers

U.S. (8 companies); Germany (3); Switzerland (2); UK (2); Japan (2); Mexico (1); Taiwan (1); France (1).

               Table 3.   Key Management Leadership Errors 

                (companies may appear more than once)

* Excess lending to poor risks, bad investments (9 companies)

* Overpriced, or badly-timed, acquisitions  (5)

* poor products unsuited to market needs (5)

* exchange-rate-induced losses, poor hedging (3)

* operational inefficiency 1

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