How Unstable Leadership Can Hurt a Company – And What Can Be Done to Fix It

by - 4 min read

How Unstable Leadership Can Hurt a Company – And What Can Be Done to Fix It

by editor - 4 min read

by editor

 

Under great leadership, a company can grow, thrive, and expand. And although a mediocre leader probably won’t do much to help with expansion or company profits, it’s very likely that said leader won’t cause the company to suffer, either.

Unstable leadership, however, can prove to be more than detrimental to a company’s employees, stockholders, and its entire future. Sometimes the solution is as simple as replacing the leader, but what if it happens to be the founder and CEO who’s causing the problems? It’s a little trickier, but there are proven solutions. Here are a few scenarios of business leaders melting down and how it was resolved to the benefit of the company.

Papa John’s Pizza

Established in 1984, Papa John’s Pizza soon grew into one of the largest pizza chains in the US, and in 2010 the company became the official pizza sponsor of the National Football League and Super Bowls XLV, XLVI, and XLVII. The beloved all-American pizza place enjoyed a meteoric rise until it became the focus of controversy thanks to Papa John himself, John Schnatter.

Offense #1: During an analyst call in 2017, Schnatter blamed the NFL for not cracking down on the anthem protests, claiming that they caused a sales decline for the company.

Result: The NFL and Papa John’s mutually ended their sponsorship agreement. One day later, the league announced a new sponsorship with pizza-delivery rival, Pizza Hut.

Offense #2: Papa John himself doubled down on the racist rhetoric. During a 2018 conference call, Schnatter casually dropped a racial slur, much to the shock of stockholders and investors.

Result: Schnatter resigned the same day that the news broke.

A few months after the board (rightfully) ousted Schnatter, removing his image from company materials and even evicting him from his office, the former Papa John launched a website called www.SavePapaJohns.com  along with a lawsuit. The website pleads for forgiveness from shareholders and investors, while at the same time divulging details of his lawsuit.

Adding to the drama were a series of sexually inappropriate allegations and toxic work culture under Schnatter’s leadership. While not the cleanest or most amicable split, the board at Papa John’s did the right thing by separating the brand from the PR disaster that is John Schnatter. The main issue, currently, is the company still carries the same name as its controversial founder.

Deciem

Founded in 2013, Deciem/The Abnormal Beauty Company started in Toronto by Brandon Truaxe and soon expanded across the globe in the US, Australia, South Korea, and the UK, propelled by its high-quality, low-cost cosmetics. The company grew so quickly and became so popular – the company’s projected sales for 2018 is $300 million – that Estée Lauder made a minority investment, buying a one-third stake. Everything seemed fine until Truaxe’s toxic personality began to become a major issue for the company.

Offense #1: For the sake of transparency, Truaxe announced that he would be running the company’s Instagram account, turning it into a sort of personal blog. Strange posts began to show up, including pictures of dead sheep, seven consecutive videos of literal garbage piles in Morocco, and a disturbing post by Truaxe telling followers he was not gay. But no updates on any skin care or beauty products.

Result: Deciem lost 5,000 followers. However, since it was Truaxe’s company, nothing immediately came of it.

Offense #2: More social media drama, this time in the form of public firings and a plea for help to followers to call 911.

Result: Almost everyone began to realize that Truaxe is less “eccentric” and more “problematic” and likely in need of help. Again, it was his company, so nothing happened beyond some bemused media coverage.

Offense #3: Now the CEO really appeared to go off the deep end. In April 2018, Truaxe posted on Instagram: “I’m done with DECIEM and EVERYTHING. No need to discuss.” In just a few months, he announced that he was shutting down all operations until further notice and announced the closure of all Deciem locations in October 2018.

Result: Remember Estée Lauder’s minority stake? Lawyers for the global cosmetics giant sought an injunction against Truaxe, relieving him of his role as CEO, and reopening Deciem stores. Truaxe’s meltdown continued, however, to the point where Estée Lauder leadership filed a restraining order against the former Deciem head over what the company called “harassing and menacing” communications. As it stands, Truaxe has been ousted from the company he started.

Tesla

Possibly the most well-known and talked about CEO of modern times, Tesla founder Elon Musk has been favourably compared to fictional billionaires like Tony Stark and Bruce Wayne, on account of his extraordinary ambition, vision, and success. Unfortunately, as time went on, Musk showed that he may have more in common with real-life business magnate, Howard Hughes.

Offense #1:

Result: Although more of a goofy moment for Musk than anything, Tesla shareholders didn’t like the idea of their CEO being turned into a meme after smoking pot with comedian and podcast host Joe Rogan.

Offense #2: As with the previous examples, Musk proved that unstable CEOs and social media is a bad combination. In this case, Musk baselessly accused British rescue diver Vernon Unsworth of pedophilia after Unsworth criticized Musk’s role in the rescue of children trapped in a flooded cave in Thailand. Musk did this not once, not twice, but three times.

Result: Unsworth’s attorney sued Musk for defamation; Tesla stock dropped.

Offense #3: Another Twitter controversy from Musk, and one that may prove to be his last. In September 2018, the Tesla CEO tweeted that funding had been secured to take the electric car company private.

Result: Although seemingly innocuous, this was the metaphorical straw that broke the camel’s back. Besides blindsiding his board members, the US Securities and Exchange Commission filed a lawsuit against Musk for securities fraud, claiming the tweet was false, misleading, and damaging to investors. Tesla stock plunged once again, and the settlement with the SEC forced Musk to step down as Tesla chairman – but allowed him to remain as CEO. (The deal also requires that guidelines be established for Musk’s social media use moving forward.)

The recurring themes in these scenarios is that it ultimately takes a group to step in and set things right, whether it’s the company’s board or investors. If there’s a problem with the bottom line, those most affected financially will go to any lengths to rectify the issue. Whether it’s removing a problematic individual like Schnatter or Truaxe, or just putting a leash on a volatile leader like Musk, CEO dramas are often resolved in time.

 

Alex Correa | Staff Writer

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