By all accounts, Sun’s Chairman and former CEO, Scott McNealy, was a great leader and manager. According to Forbes, 75 CEOs were managed by McNealy at one time or another, including Google’s Eric Schmidt and Yahoo’s new chief, Carol Bartz.
That’s impressive to be sure. In the same Forbes article, McNealy talks about the management tricks he used to grow the company to $10 billion. Again, an impressive feat few have matched. I said it myself, in a 2007 CNET post:
By any measure, quantitative or qualitative, Scott [McNealy] was an extraordinary leader and manager. Excluding the [dot-com] bubble (I always exclude the bubble), he led Sun from startup to roughly $20B in market cap, an extraordinary achievement.
Let’s pause there for a moment. Sounds like a lovefest, doesn’t it? But there’s a flip side to the story. Read on:
But over the next decade - again, excluding the bubble - the stock essentially flatlined, significantly underperforming its peers and all major market indices. Sun’s stock price today is roughly the same as it was ten years ago.
The second half - an entire decade - of Sun’s performance as a public company has been poor, to say the least. If you bought [JAVA] in the past ten years, you’re not likely to be a happy camper. That affects lots of shareholders and employees - numbers with lots of zeros at the end.
Since then, shares of Sun have plunged 80 percent, far worse than peer companies and broad market indices. To be fair, Jonathan Schwartz has been running the company for over two and a half years now. But wasn’t Schwartz also a McNealy disciple, not to mention Scott’s choice to replace him? How about that?
Don’t get me wrong, McNealy built Sun and, for a time, it was an important, profitable, high-growth company. But that ended long ago. Today, Sun’s business model is essentially broken, and that’s been the case for a very long time. Moreover, its “death by a thousand cuts” multi-year restructuring has failed.
Look, I think it’s great that Scott McNealy trained 75 CEOs for other companies. Maybe he should have been an executive coach. But the true measure of corporate success is building long-term shareholder value. In that sense, he failed. He couldn’t do for his own company and its shareholders what some of his disciples have done for theirs. And in that context, the horrendous performance of Jonathan Schwartz is truly ironic.
In the Forbes interview, McNealy said, “A lot of those good leaders who came out of Sun understood and knew what I was trying to do when I picked an enemy, or when I picked a cause or when I put all the wood behind one arrowhead. It was about trying to align a bunch of really different people around a commonality of purpose. That’s what really great leaders do.”
Maybe that’s what “really great leaders do,” but really great CEOs create long-term shareholder value.
