3 Warning Signs of a Bad CEO

IAGO: “O, sir, content you; I follow him to serve my turn upon him:
We cannot all be masters, nor all masters cannot be truly follow’d…”
(Iago on serving his reviled master, Othello)
–William Shakespeare, Othello, Act 1, Scene 1

I cannot think of a time when some type of business wasn’t on my mind. And with 40 years in the business of working across a broad array of industries with clients in operational and financial distress, I’ve come across plenty of bad CEOs.

Leadership is a hard job. Effective and successful leadership is even harder. The COVID pandemic of 2020 and 2021 put retail CEOs through some serious tests: supply chain delays, shifting consumer desires, brick-and-mortar stores vs. online shopping and competitive pressures related to each of the foregoing. This is all in addition to working remote, lockdowns and related business and personnel issues. CEOs, even bad CEOs, were forced to navigate these shark-filled waters just to survive.

And, under these extenuating circumstances, many boards of directors and stakeholders decided to simply stand pat and weather the storm with the CEO they had — bad or not. Or, as the late great University of Texas football coach Darrell K. Royal once famously said about his quarterback pick, you have to “dance with the one that brung you.” But does this apply to bad CEOs post pandemic? I don’t think so.


What makes a bad CEO? We will get to that. First, what makes a good CEO?

Buy-in: The ability of a CEO to engender support and legitimate buy-in from employees and his C-suite team is crucial, as is cultivating a culture of performance, accountability and transparency. Those all start at the top with the CEO and it is especially important in middle market organizations. 

Adaptability and approachability: Good leaders are approachable and adaptable. They’re humble and don’t wear the CEO title as an “I can do anything I want” badge. Good CEOs seek out alternative opinions. They regularly ask their C-Suite teams, line managers and even employees “what are we missing?” or “what’s working here and what’s not?” They’re tough, sure, but they’re also fair.

Culture and care: These questions apply not just to the products or goods that are being produced but also to the overall company itself and its culture. Are the employee bathrooms clean? You wouldn’t think that would be a CEO concern, but it should be. Unhappy or disregarded employees aren’t as productive, or service- and customer-oriented. as you’d want them to be.   

What Not to do…

Unfortunately, examples of bad CEOs are all too easy to find. Edward S. Lampert at K-Mart/Sears, Do Won Chang at Forever 21, Bernard Ebbers at WorldCom and Ken Lay at Enron are all recognizable examples often mentioned in articles on the topic of the worst CEOs in business. It begs the questions why, and what happened? Do bad CEOs start out bad or do they just end up that way?

As Shakespeare wrote in his play Henry IV, in Act III, Scene I, with King Henry speaking, “Deny it to a king? Then happy low, lie down!/Uneasy lies the head that wears a crown.” King, CEO, Leader, it’s the pressure man, the pressure!

It would take a legion of psychologists and batteries of studies to fully understand why seemingly intelligent, responsible, outwardly personable and successful people who become CEOs go bad. How do you spot one?

It’s all about him/her…

Outsized compensation: From higher than the moon compensation and perks to an indefatigable belief that everything they say, do or touch, is golden, bad CEOs have an undeniable belief that their interests come before anyone or anything else, and outsized compensation can be a major warning sign.

No thanks or recognition: The CEO never acknowledges, thanks or rewards anyone else on their team. An inability to appreciate the team or feel empathy toward them is a classic bad CEO giveaway. After all, it’s not the CEO designing the line, developing and implementing a marketing strategy, organizing the manufacturing supply chain to get merchandise into stores or sewing on buttons.

Inability to acknowledge failure: An inability to recognize and admit failure. Arrogance, hubris or just plain stubbornness. Business reviews and business failures are full of examples of this. Lehman Brothers under Dick Fuld, a.k.a. “The Gorilla,” for his overbearing style, K-Mart under Chuck Conway who was cooking the books, and the list goes on and on.

What do you do if you discover you’re working for a bad CEO? It all depends on where you land in the org chart. If you’re in the bad CEO’s C-Suite, I’d keep my resume dusted off. Managers lower down the chain have less exposure to the fallout but share the same bad CEO-induced angst. If there is a bright spot, bad CEOs always get found out and, if not sacked by their boards, then forced to modify their bad behavior.

The real result in this post-pandemic, recessionary economic cycle when financial and operational performance are key is that bad CEOs won’t be tolerated and will have shorter corporate lifespans.  

Drew McManigle is the Founder and CEO of MACCO. He has led numerous companies through both in and out-of-court restructurings. McManigle’s global experience extends across a variety of industries, including energy exploration, production and refining, healthcare, consumer products, defense, food and pharmaceutical manufacturing, commercial construction, distribution, transportation, heavy equipment and hospitality. He has represented company, debtor or creditor interests in bankruptcy and state courts nationwide. Prior to MACCO, McManigle was a principal of his own firm for 22 years; was employed by a Fortune 500 dialysis provider; and established the Houston office for a California based advisory firm. He attended Texas Tech University and received his bachelor’s degree from the University of Houston.

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