“The best bargain is an expensive CEO,” wrote Al Dunlap. The history of Sunbeam decisively proves him wrong.
In a decision that will almost certainly be overturned on appeal, a US court has awarded financier Ronald Perelman damages of $1.5bn (€1.2bn) against Morgan Stanley. The issue is the acquisition by Sunbeam Corporation of Perelman’s Coleman business. This is the latest bizarre twist in a convoluted story.
Sunbeam products – toasters, mixers, blenders – are American icons. But the company that makes them has suffered two decades of ministrations from corporate saviours. Three such characters, each exemplars of distinct types of heroic chief executive officers, have each left the business in a worse state than before.
In the 1980s Sunbeam was part of Allegheny International, a sprawling conglomerate led by Robert Buckley. Buckley was the consummate deal maker, his eye on the next transaction even before the last had completed. He is perhaps best remembered today for his corporate extravagance- most of all, the fleet of jets that transported him, his family and colleagues around numerous residences and a sprawling empire.
Allegheny International finally collapsed in 1988, and Sunbeam emerged from unusually complex bankruptcy proceedings under the guidance of investment bankers, who sought a new hero to lead their company forward. The brief was to identify a safe pair of hands, someone with an unblemished track record in a vaguely related business. They found the man in America’s best business school, General Electric. But under Roger Shipke’s leadership sales stagnated and earnings fell.
After less than three years Shipke left, and the eyes of the board turned towards a different kind of hero. A transforming influence was required, rather than a safe pair of hands. The favoured candidate was one of the most extraordinary figures in recent American business.
Al Dunlap had achieved fame for his supposed turnround of Scott Paper, whose Andrex toilet paper was as ubiquitous in British bathrooms as Sunbeam products in American kitchens. Dunlap had slashed costs and stuffed inventories in an 18-month reign that ended with the sale of what remained of the business to Kimberly Clark, Scott’s most direct competitor.
The central characteristic of Dunlap’s tenure was self- aggrandisement, in cash and in press cuttings. He left Scott with $100m. Journalists rarely went short of a story about “Chainsaw Al”. Before going to Sunbeam he wrote a book, Mean Business, vainglorious even by the standards of business biographies.
Dunlap was the transformational chief executive, the type whose success is mistakenly attributed to business acumen rather than the efforts of public relations advisers. The key skill is to move on in time. Dunlap seems to have been trying to leave Sunbeam before the business hit disaster, but after 18 months he was fired. Too late: the company again went into bankruptcy.
These experiences do not seem to deter the search for heroes. Later Buckleys, Shipkes and Dunlaps still get adulatory portraits in business magazines, at least for a while. Bernie Ebbers dazzled investors with the scale and relentlessness of his acquisitions, Peter Davis was welcomed back to Sainsbury’s for his solid track record at Prudential and Carly Fiorina was invited to bring to Hewlett-Packard the magic she had worked at Lucent.
There are geniuses in business, people whose unique personal skills are the basis of their unique achievements – people such as Walt Disney, Rupert Murdoch and Steve Jobs. But such figures are few and far between. They tend to keep tight control of the companies with which they are associated rather than place their CVs with headhunters.
Americans go on wanting toasters and Sunbeam employees go on making them. The production of small kitchen appliances remains a useful business. Sunbeam re-emerged as American Household Products, now a subsidiary of Jardens, a public company with related interests.
But it is never quite business as usual. The transformational leaders had real effects on products, careers and communities. And most were malign. “The best bargain is an expensive CEO,” wrote Mr Dunlap. The history of Sunbeam decisively proves him wrong.