Tuesday, June 9, 2009
(Cont'd from above)...

Jim (cont'd):   


Viewer Email:      
Jim,
I would like to nominate Jim McNerney from Boeing( BA) to the Wall of Shame for his serial destruction of shareholder value. Boeing has been promising the 787 Dreamliner for too long, and not delivering. In software, it used to be called vaporware; for airliners, it’s a Dreamliner. I would only let him off the Wall of Shame when they finally deliver the first 787. You should also have another calendar showing how many days the 787 is overdue.
Dan

Oh contrar my friend… because I think that if McNerney were to leave Boeing it would hurt the stock, and I think that the Dreamliner is going to be in the air in the next 10 days… if the CEO leaving would damage the stock, then that CEO is not a Wall of Shamer, that is one of our rules… plus Boeing is down just 12% since he took over… outperforming the S&P 500, down 21% in that period… McNerney has tried to build a very difficult plane… and make no mistake, it is hard for the other guys too… Airbus has its own problems… while at the same time rebuilding Boeings defense business.. most importantly, a new aerospace cycle is about to begin… I think that it will cause a multi year run up in the stock… and I do not want Boeing to go up without us… you should have been buying Boeing today in the weakness, all day.

Or how about this email from Don, Don writes:

Viewer Email:      
Jim,
My nominee for the Wall of Shame is Ivan Seidenberg of Verizon (VZ). He has put his interest above those of his shareholders dating back to his days at NYNEX. He has made himself rich, while the shareholders get little. If merit were part of the job, he would be out on the street. It just shows how hard it is to get rid of a CEO with the buddy system in place.
Don

I actually think that Seidenberg is a brilliant CEO… but here we have to ask the question, does it even matter… Verizon is in a notoriously crummy business… the wireline telephone biz, which has been in a long time decline for ages… while Verizon is down 33% since Seidenberg took over as sole CEO on April 1, 2002, including dividend it is down just 6.2%… while the S&P 500 is down 18% over the same period… dividends matter… this is not Ivan the Terrible, he is Ivan the Okay… and in the same period, AT&T is down 34%, or down 6% with dividends… Quest is down 43%, down 36% with dividend… Sprint is down 62%, or 58% with dividends… Comcast is down 34%, for a total return of down 32% including dividends… so Verizon did no worse, and in many cases did much better than the competition with Seidenberg at the helm… I cannot put someone on the Wall of Shame, unless his management has made his stock do substantially worse than its peers… Seidenberg has had to reinvent Verizon with wireless and with phios… he has grown revenues from $67B in 2002, to $97B in 2008... 44% growth… earnings have gone from $1.49 in 2002, to $2.26 in 2008... up 51% since Seidenberg took over… that is not bad performance in a very troubled industry.

How about this suggestion from Les.

Viewer Email:      
I strongly recommend George David for the Wall of Shame. He is ruining United Technologies (UTX) and getting away with it-- he is not recognized for the damage he’s doing. He has precipitated a brain drain at UTX after implementing a Draconian system of micromanagement called “ACE”. This stifling micromanagement system implemented throughout UTX is gradually, but surely killing incentive and creativity throughout UTX. In addition, he has bought back the stock to reduce float and increase the stock price instead of using that money to pay dividends to investors.
Les

Alright, a lot of misconceptions… George David is now the Chairman of United Technologies, not the CEO… but the relevant question here is how did he do as CEO compared to similar companies… now listen, while George David was CEO from April 18, 1994 to April 9, 2008, United Technologies went from $8.06 to $70.81... that is 778% gain… that is a Hall of Fame performance, not a Wall of Shame performance… GE up 361% that period… Textron 346%.. Illinois Tool 404%… Emerson 260%… General Dynamics up 830%… but the S&P 500 was up just 206% in the same period… David beat out all but one of the companies in his sector… and he thrashed the market… David’s inclusion on the Wall of Shame would be ultimate injustice… I would compare it to imprisoning Andy Duvrain in “Shawshank”… other conglomerates took on too much debt or strayed too far afield… United Technologies stayed very focused, and very international… when George David took over in 1994, it had sales of $20.8B… his last full year, $54.8B… UTX net income, $585M to $5.4B… if anything the man deserves our acclaim, and he has paid good dividends.

The main things that we care about is whether the stock would suffer without the CEO… how it has done vs. similar companies during the CEO’s tenure… and whether or not the companies problems simply stem from the fact that it is in a bad industry… Boeing, Verizon, UTX… none of them have been so poorly done that their CEO’s belong on the Wall of Shame.

So who does qualify, how about this email from Jeff… I think that he is on the right course… he says

Viewer Email:      
Jim,
I think I have a great candidate for the Wall of Shame in George Economou. Under Economou, DryShips (DRYS) is down from over $120 to $5 after he massively over-leveraged himself buying Ocean Rig at the height of the oil bubble and diluted his stock about five times over. he is also quoted as calling all American investors, which includes all Mad Money viewers, stupid. I don’t care if you destroy what is left of my DRYS position by outing this guy because justice needs to be served. Go get him Cramer!
Jeff

To be fair to Economou just for a second before I hang him completely out to dry… he took DryShips public in February of 2005, and the stock closed at $20.20 the first day of trading… at the current price he has presided over a 66% decline, not as terrible… especially compared to the other dry bulk shippers, and totally when you consider the incredible round trip that this monster has taken… over the same period, Excel Maritime down 64%… Diana Shipping down 9.9%… Genco is up 10%… and the only one that approaches DryShips in terms of miserable performance is Eagle Bulk, and even the 55% decline there looks better than what Economou has delivered for his shareholders… I think that the stock would definitely rise if he would resign… in order to spend time doing anything else rather than running the company… including, and may I suggest, taking the U.S.S. Minnow out for a multi year spin.

And yes, we can lay the underperformance at the feet of Economou… because he is the genius who bought new ships at really high prices for DryShips… ultimately leaving his shareholders high and dry, while at the same time Herbjorn Hansen, Cramer fave CEO of Nordic American Tanker, husbanded his cash and waited for a better moment to buy new ships… admittedly NAT is an oil tanker company not a dry bulk shipper… but the principle is the same… you can see the difference between good management and Economou horrible Wall of Shame management.

Here is the bottom line…

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