Would You Hire “Chainsaw Al”? – #44

Chainsaw Al’s public track record was troubling in that he made his fame in laying off personnel by the thousands, but stockholders and Wall Street benefited because they knew if AL took over the show, profits grew at an amazing rate – (73% at Sunbeam – a fix they badly needed- and 900%+ in stock price at Lily-Tulip). (How about tripling the stock price of Scott Paper – they were $2.5B in debt when he became CEO.

Where was the Board of Directors who would normally check the backgrounds of higher executives such as the CEO or Chairman of the Board in a very thorough manner to include using outside Auditors and Services dedicated to checking out people. In the case of “Chainsaw” Al, there was abundant public information available about Al, to clearly show that he was a manipulative, ruthless and destructive leader who had sucked the life and soul out of every company he managed and the people who worked there. He managed to steal the dignity, purpose and sense out of organizations.

All Al wanted to do was to enrich himself and the people who were in line to profit greatly from his actions. For example: Wall Street

MANAGEMENT POINT:

Senior Management profiles should be scrutinized in-depth by a series of personnel inside and outside of the company. Al was known to be a “hired gun” that laid off workers in total vs. actual contribution through performance. A potential Senior Manager’s profile should be investigated from A To Z. If any area raises a red flag, that investigation should be focused on clearing up the area and if resolution is unavailable – the hiring group should cancel the candidate and start all over from a ground zero basis. No Red Flag Should be overridden or overlooked.

Had Sunbeam done their homework, they would have uncovered fraud allegations that stemmed from “Chainsaw Al’s” tenure at Nitec Paper in upstate New York. He was fired from Nitec in 1976. Although the job had been scrubbed from his employment records. Nitec accused Al of acting fraudulently, reporting multi million dollar profits while the company was suffering a $5.5M loss. The Financial Officer testified in court that Al had ordered him to cook the books. Al had to face years of law suits until the case went away shortly after they filed for Bankruptcy in 1982. Nobody could have missed this information unless it was people who wanted that info to be hidden – this data could have been too valuable to somebody. Where was the Board of Directors?

Had you had this info on Al, would you have hired him as CEO and Chairman? Just reviewing the dates of employment according to the following listing leaves plenty of areas where key information could have been sourced – how could he have been at Nitec when the job listings show him at Sterling Paper.

  • Kimberly Clark 1963 – 1967 Mgmt. Trainee
  • Sterling Pulp &Paper 1967-1977 – Genl. Supt.
  • 1978 – 1994 Number of Jobs
  • American Can –Strategic Planning – Sr. VP
  • Lily Tulip Cup – CEO
  • Crown Zellerbach
  • Consolidated Press Holdings – Australia
  • Scott Paper 1994 – 1996 CEO & Chairman
  • Sunbeam Corp. – 1996 -1998 CEO&Chairman

In his book “Mean Business: How I Saved Bad Companies and make Good Companies Great” Al indicated that the Al Dunlaps of the world would not be hired if corporate people did their jobs, he wrote. “Some executives just can’t or won’t make decisions or consistently make the wrong decisions, their incompetence virtually screams out for a “Chainsaw Al” and his fraudulent ways. His downsizing expertise resulted in 11,200 people losing their jobs at Scott and (50%) at Lily Tulip and at Sunbeam. “We’re more like Doctors. We know its painful to operate, but it’s the only way to keep the patient from dying. Greed is hungry and to keep feeding it properly sometimes becomes a challenge.

Al’s fortune turned at Sunbeam as he was fired, in the wake of several quarterly earnings disappointments and regulatory filings that showed Sunbeam had applied 1998 payments – from retailers buying barbecue grills- to previous years books creating a false picture of a surge in 1997 Sales.

His actions continued to haunt him into 2002. He and other Sunbeam executives paid $15million to settle a stockholder lawsuit that accused them of using inflated stock prices to complete the company’s purchases of Coleman a manufacturer of camping and leisure products. Also, the purchase of First Alert, a maker of fire alarms. In 2002, he also paid a civil suit filed by the SEC for $500M and agreed to be barred from ever-again serving as an officer or director of a Company. Just as a small note, the outside Auditing Company for Sunbeam was Arthur Andersen who declared bankruptcy after their cover up for fraud at Enron a few years later. Is it any wonder that “Chainsaw Al” knew who to use as an outside auditor. Al died this January in Ocala Fl. At the age of 81. 20M+ fired employees will be cheering him on to wherever he winds up.

Sunbeam filed for Bankruptcy in 2001 and we have to make sure that we don’t hire without in-depth research into a candidates background and not bypass any red flags.