Why CEOs Should Be Ready To Resign

The variety of reasons a CEO gets the boot is growing.

Phil Condit was busted at Boeing because his management team tried to buy its way into a big contract with the military. Boeing’s tack: You buy planes from us, Darleen Druyun, and we’ll give you a plum job here.

Craig Conway, CEO of PeopleSoft, got to take a hike because of a bad attitude. His aversion? Oracle and its CEO, Larry Ellison, who fired Conway earlier in his career. With Conway gone, PeopleSoft sold out to Oracle.

Most awesome was the record-setting implosion of Bernard Kerik, would-be CEO of Homeland Security. He had a nanny problem, an extramarital problem, an extra-extramarital problem, and an I-took-too-much-money-from-a-potential-supplier-to-federal-security-agencies problem. All in the first week of nomination. Bernie gets our only four-star rating for creative, multifaceted approaches to getting fired, in the shortest possible time.

Bernie Ebbers and Scott Sullivan at WorldCom, as well as the Enron trio of Ken Lay, Jeff Skilling and Andy Fastow are almost too obvious. They just appear to have committed fraud, albeit on a billion-dollar scale.

By comparison, Krispy Kreme CEO Scott A. Livengood was a bit player in mid-January when he threw himself on the spike. Folks found his claim that low-carb diets did in his company’s earnings a little hard to swallow. He decided his best face-saving move was to leave.

But the departure to really take note of was the resignation Jan. 17 of Randy Rademacher at the Comair short-haul unit of Delta Air Lines. He decided to resign after his company’s computer systems crashed on Christmas Eve.

Comair took five days to get fully operational again. Bags were lost. So were customers. So much for destruction wrought by low-cost competition. Much easier, if you do it yourself.

To understand the essence of this Snafu in the News, just go to Out of Scope on our back page. A Boeing software-writing subsidiary decided 15 years ago that the maximum number of schedule changes Comair would face in a month was 32,000. But bad weather during the holiday season triggered a lot of crew and plane reassignments. Voilà! The system shut down when the magic number was reached.

Should Rademacher have known that there was a 32,000-change-per-month limit in the software that governed Comair’s operations?

Not on Dec. 23. But on Dec. 25, you bet.

Think this is an isolated problem?

Rademacher was not the first corporate leader to be impaled on a computer system malfunction. On the last day of 1999, the president of First USA Bank’s WingspanBank.com Internet venture, James Stewart, resigned. Consumers had ripped First USA for not posting payments on time, arbitrarily raising rates, eliminating the grace period on late payments and imposing too many late charges. Computer glitches also led to improper charges to customer accounts.

In 2000, William O’Connor, the CEO of Gtech Holdings, and Steven Nowick, its president, were forced to resign after a computer cover-up. The lottery software supplier revealed that a glitch in England had meant Gtech overcharged lottery-ticket retailers and underpaid winners for four years.

Two years later, in Japan, the Mizuho Financial Group cut pay of about 100 executives by as much as 50% for six months after a massive computer failure. The cuts included pay of senior executives not responsible for computer systems.

Not a week after Rademacher resigned, so did Bill Miller, the chief executive of online retailer Eziba.com.

Eziba had to suspend operations after a catalog mailing that was supposed to boost sales bombed. The problem? The catalogs got sent to the wrong people on a mailing list. The people who were least likely to buy. A “computer error” got cited. Miller got to walk out the door.

The message: The inner workings of computer systems can’t just be left to the chief information officer anymore.

If you’re the CEO or president of a company, you had better be prepared to take responsibility for how your systems work, down to knowing exactly what will cause them to shut down or malfunction.

Either that, or be prepared to resign when they do.