Founders that damaged their companies
Successful founder-CEOs are rare, says 2017 research from professors from Duke, Vanderbilt and Harvard. In the study titled “Are Founder CEOs Good Managers?” researchers Victor Manuel Bennett, Megan Lawrence and Raffaella Sadun found that companies run by their founders were less productive and more poorly managed.
The following are founders that damaged their companies in various ways including losing money, lying to investors, causing bankruptcy, or putting themselves out of business. Not all founder-CEOs are like this, but don’t say we didn’t warn you…
1. Dov Charney — American Apparel
The fashion world adored Canadian-born Dov Charney’s clothing company, American Apparel, at first. Then, reports of sexual harassment allegations against Charney caught American Apparel’s board’s attention. Charney was eventually sacked from the company in 2014. The brand had taken a hit financially — it declared bankruptcy protection in 2015.
Dov Charney’s problems continued — RetailDive said he was ordered to pay hedge fund Standard General (who was working to help Charney regain control of American Apparel) $19.5 million. He’s now created a new brand — Los Angeles Apparel.
NEXT: She was found guilty of conspiracy, obstruction of justice and lying to a federal investigator.
2. Martha Stewart — Martha Stewart Living Omnimedia
The maven of all things domestic shocked the world with felony charges. After a six-week trial, a jury found her guilty of conspiracy, obstruction of justice and lying to a federal investigator about a well-timed stock in 2004. Stewart spent five months in a minimum security prison in West Virginia.
A 2013 USA Today article says the fact that her self image took a hit further damaged Martha Stewart Living Omnimedia. NY Times said in 2004 that the company’s stock price “took a wild ride.” Other experts said that Martha Stewart’s conviction dealt a staggering blow to the company.
NEXT: Many used to be obsessed with this company’s signature gadget.
3. Mike Lazaridis — BlackBerry
Originally called Research in Motion, Lazaridis co-founded BlackBerry with Douglas Fregin. He was also co-CEO with Jim Balsillie through January 2012. USA Today credited Lazaridis and Balsillie for pioneering the smartphone revolution. The 2013 article goes on to say that Mike Lazaridis didn’t prepare BlackBerry from all the competition.
The major flop of their product BlackBerry PlayBook Tablet and a four-day worldwide service outage were some of the company’s largest mistakes, says USA Today. BlackBerry’s focus on professionals, instead of the general public, was also detrimental.
NEXT: This is one of the most high profile cases of corporate fraud in United States history.
4. Ken Lay — Enron
Keny Lay is infamous, unfortunately, for being indicted for wire fraud and conspiracy. Here he is in Houston, Texas July 2004 being escorted from a car into a federal court by law enforcement. Lay was found guilty of covering U.S. energy company Enron’s finances to deceive the public, shareholders and government regulators.
Lay was co-founder of Enron, along with Jeffrey Skilling. The energy giant imploded in 2001 becoming one of the highest profile cases of corporate fraud. The documentary Enron: The Smartest Guys in the Room explores its fall. Lay died in July 2006, just several years after being indicted.
NEXT: Originally, his company was named Sound of Music.
5. Richard M. Schulze — Best Buy
The entrepreneur started his company, originally named Sound of Music, in 1966, says Forbes. USA Today says Schulze struggled to keep Best Buy relevant in an industry moving online. As is the story with many retailers, Best Buy took a hit from Amazon sales. Schulze served as CEO from 1983 until 2002, then became chairman in 2012.
He stepped down from that when a scandal went down around former CEO Brian Dunn — the CEO he picked. After the company discovered Dunn had had an affair with another employee, he was forced to resign. Schulze had knowledge of the affair, an internal investigation found.
NEXT: This founder started his technology company when he was just 19 years old.
6. Michael Dell — Dell
The entrepreneurial Mr. Dell founded the computer giant in 1984 when he was the ripe young age of 19. At the time it was the largest computer company in the world, says USA Today. When Dell returned to CEO in 2007, his company started to lose consumers’ interests — they were more into tablets and smartphones.
The Securities and Exchange Commission (SEC) alleged that Dell was guilty of accounting fraud that would mislead investors in 2010. They fined Dell, the company, $100 million and Dell, the person, $4 million. They went private that year with a massive buyout of $24.4 billion.
NEXT: Do you remember getting checks from a class action lawsuit against this company?
7. Andrew Mason — Groupon
Groupon was very popular when it first came onto the market — some consumers loved being able to search for deals and discounts. Some businesses liked it because it gave their goods and services more exposure and led to new clients. Groupon caused regulators pause in 2011 with its accounting methods, says USA Today.
It also overstated its revenue by more than $20 million in 2012! Groupon declined in popularity because the whole discount fad started to fade. There have been other mistakes, too, and USA Today cites reports that Mason isn’t mature enough to run a company.
NEXT: Some of the unpopular opinions this pizza company founder voiced got him a lot of flack.
8. John Schnatter — Papa John’s
Ever heard the term “think before you speak?” We don’t think Papa John’s founder John Schnatter has. He first slammed NFL players protesting police brutality by kneeling during the national anthem, saying it was hurting viewership of games and pizza sales. Fans and the business community were not happy about these sentiments.
To make matters worse for Schnatter, he used a racial slur during a training session designed to prevent issues like this. Papa John’s lost its relationship with the NFL and MLB, and its name was taken off the University of Louisville’s stadium, says Restaurant Business.
NEXT: Like Papa John’s, this company’s founder’s political views also damaged its reputation.
9. S. Truett Cathy — Chick-fil-A
The founder and former CEO of chicken restaurant Chick-fil-A, Dan T. Cathy (far left), was deeply religious. This extended to his business practices, too — Chick-fil-A’s always closed on Sunday, for example. The chain donating to organizations that oppose same-sex marriage is another example — one that hurt their business.
This happened after Cathy was CEO, but we can say he tangibly was related to this for the sake of this list. Pro-same-sex marriage groups slammed the company and students protested Chick-fil-As from being built on their campuses.
NEXT: A female engineer wrote a blog post claiming female employees at this company were treated poorly.
10. Travis Kalanick — Uber
Where do we start with Uber? Well, its public blowback first started when former Uber engineer Susan Fowler wrote about her experience with sexual harassment in the tech giant’s workplace. After she published her blog post, other employees came forward with their own accusations against Uber — this involved stories of groping.
The founder himself was caught on camera berating an Uber driver. The driver said that Uber’s price cuts drove him to bankruptcy. Travis Kalanick told the driver to take control of his own life. Then, Uber used software to deceive regulators and got sued by Google for stealing its ideas.
NEXT: This famous inventor made some revolutionary products but wasn’t a good businessman.
11. Thomas Edison — Edison Phonograph Company
He’s considered a pioneer and one of the greatest inventors in United States history. He formed his company, Edison Phonograph Company, in 1887 to mass produce his invention, the phonograph. Business Insider says Thomas Edison made mistakes that were fatal to his company. First off, the wax cylinders that phonographs played music off of were hard to make.
As a result, sales were limited. Then, Business Insider says Edison let other companies dominate the business of selling discs, losing out on the market he created. Yet, Edison still marketed the wax cylinder. The company went out of business in 1929.
NEXT: Her company was thought to be the next breakthrough technology company until it flopped.
12. Elizabeth Holmes — Theranos
She was touted as the youngest self-made female billionaire in 2015 by Forbes and billed as the next Steve Jobs, citing a $9 billion valuation of Theranos. The next year, that number was zero. Elizabeth Holmes and her blood testing technology company had a lot of potential but that all came crashing down starting in 2015 because of a report from WSJ reporter John Carreyou.
He released a bombshell of an article October 15, 2015, that debunked Theranos’ technology and wrecked Elizabeth Holmes. Theranos closed down September 2018 — or did it? CB Insights says the company has received five patents from the federal government so far in 2019.
NEXT: His company rose and fell pretty quickly.
13. Ben Kaufman — Quirky
Here’s an excerpt from a New York Times article that mentions Ben Kaufman: “One indication that Mr. Kaufman is a bro? Well, the first reference he lists on his LinkedIn page is: ‘He’s a d*** … but hilarious.’” That one sentence might tell you a lot about Ben Kaufman’s leadership style.
Quirky started out promising when it formed in 2009 and managed to raise $185 million to build its social product platform. It went bankrupt pretty quickly because its “‘brash’ and ‘unorthodox’ chief executive had no business being a chief executive,” says New York Times.
NEXT: He’s probably the most famous scammer in United States history — so far at least…
14. Bernard Madoff — Bernard L. Madoff Investment Securities
You’ve probably heard the name “Bernie Madoff” at some point in your life. He’s infamous for a massive Ponzi scheme that landed him in a medium-security prison with a 150-year sentence and caused financial hardship for many families. The scam started in the 1970s but he got caught and pleaded guilty in 2009.
In Bloomberg’s profile of the company, it notes: “As of December 15, 2008, Bernard L. Madoff Investment Securities LLC is in liquidation.” Irving Picard is the trustee overseeing Madoff’s company’s liquidation who has recovered 70 percent of approved claims — aka $13.3 billion.
NEXT: He became known for his lavish compensation packages and bets on his company’s performance.
15. Aubrey McClendon — Chesapeake Energy Corporation
He co-founded the Oklahoma City-based company that focuses on hydrocarbon exploration. Aubrey McClendon (left) was considered a fracking pioneer but was eventually accused by federal prosecutors of rigging bids for drilling rights thus violating antitrust laws, says Texas Monthly. Energy and Minerals Group had dumped $3 billion into McClendon’s new company, American Energy Partners.
In 2016, Energy and Minerals Group sent out a memo to its investors saying it wouldn’t be doing any more business with McClendon, as it was too risky. March 2, 2016, McClendon crashed his car and died.
NEXT: There were documentaries on Netflix and Hulu about the disastrous music festival he attempted.
16. Billy McFarland — Fyre Media Inc
Fyre Festival was billed as a party island paradise but ended up being a disastrous event on many levels. Its organizer, founder of Fyre Media Inc Billy McFarland, is now serving jail time for fraud associated with the festival. McFarland managed to convince hoards of people to dump tons of money on tickets but couldn’t figure out how to actually run a music festival.
When the patrons arrived on the Caribbean island location of Fyre Fest, nothing was prepared for them — the luxury living quarters they were promised were FEMA tents, there was barely any food (let alone the high-end cuisine they were promised) and no running water.
NEXT: His company was guilty of convincing high-risk lenders to buy subprime mortgages.
17. Angelo Mozilo — Countrywide Financial
“Angelo Mozilo got rich selling the American Dream. Then, he became the face of America’s mortgage nightmare,” writes CNN Money. Having a home with the white picket fence is part of what most thought was the coveted American Dream. Mozilo’s company, Countrywide, made it too easy for millions to own a home.
Countrywide Financial became the number one mortgage provider in the U.S., Mozilo himself made over $400 million between 1999 and 2006, says CNN Money. A pioneer of subprime mortgages, Mozilo’s success came to a crashing halt when home prices collapsed.
NEXT: His company was one of the biggest airplane makers of the first two decades of the 20th century.
18. Tommy Sopwith — Sopwith Aviation Company
His airplane business began in 1912 and had a good start at first. Tommy Sopwith’s Sopwith Aviation Company was contracted by the British government during World War I. During that time, Sopwith constructed 16,000 aircraft and had 5,000 on staff, says Business Insider. It was one of the biggest aircraft companies for a while.
Founder Tommy Sopwith didn’t realize that converting aircraft products was absolutely essential in order to appeal to a commercial market, says Business Insider. In addition, Sopwith’s company was impacted by wartime earnings, becoming punished by anti-profiteering taxes.
NEXT: Allegations of sexual misconduct wrecked this once mighty Hollywood executive and his company.
19. Harvey Weinstein — The Weinstein Company
He was once a powerful Hollywood executive that could make or break actresses’ careers until sexual misconduct allegations came forth about Harvey Weinstein. Actresses Ashley Judd and Rose McGowan were some of the women to come forward and an article about the allegations was published in the New Yorker. After that, it was finally over for Weinstein.
As for the Weinstein Company, it went bankrupt in March 2018 due to the ruining of its founder’s image. Dallas-based equity firm, Lantern Capital Partners, ended up purchasing the film company in May 2018 for $310 million plus the assumption of $115 million in debt.
NEXT: Once one of the largest U.S. cable companies, its founder is now in prison.
20. John Rigas — Adelphia Communications
The cable company was first formed in 1952. By the 1990s, it had almost 5 million subscribers and was one of the biggest cable providers in the United States, says Business Insider. The rapidly growing company had cable systems in more than 30 states.
Then, Rigas decided to siphon off money to fund family-owned companies and Adelphia went bankrupt in 2002. It’s nice to support your family, but this decision is what put Rigas in prison after being charged with stealing nearly $100 million. Time Warner bought its assets.
NEXT: This company suffered from decisions by its founders, which included actress Jessica Alba.
21. Jessica Alba and Chris Gavigan — The Honest Company
We could make the “dishonest company” joke here but it’s probably already been done a million times. Entrepreneur recalled how The Honest Company’s products contained a toxic ingredient called SLS, the company denied that its products contained SLS and then called the reporting that Wall Street Journal did about their SLS ridden products “junk science.”
Now, because this toxic ingredient came to light, The Honest Company is facing several lawsuits. This is a far cry from its original bright beginnings — Jessica Alba and Chris Gavigan’s company was once worth $1.7 billion, close to an IPO and raised over $200 in venture capital funding.
NEXT: This company is working to commercialize high-speed transportation technology.
22. Shervin Pishevar and Brogan BamBrogan — HyperLoop One
A lot happened with the co-founders of the transportation group HyperLoop One. Entrepreneur says that BamBrogan and three other co-conspirators attempted a coup at Hyperloop. They were driven out, as you can imagine, and then sued co-founder Shervin Pishevar. What they were alleging of Pishevar sounds almost too insane to believe.
Entrepreneur says they alleged “breach of contract, wrongful termination, defamation, cronyism, nepotism and a death threat involving a hangman’s noose.” OK, that’s a lot. This lawsuit later settled. HyperLoop One is now renamed Virgin HyperLoop One.
NEXT: The founder of this dating app made some ill-informed decisions but it’s still present on many individuals’ phone.
23. Sean Rad — Tinder
The founder of dating app Tinder has been in and out as CEO, said a lot of things people found ignorant in the media and has been accused of sexual harassment by fellow Tinder co-founder, Whitney Wolfe. (She went on to become CEO of another dating app called Bumble.) InterActiveCorp (IAC) didn’t like how Rad handled the complaint.
They then demoted him from CEO in 2015 but Rad became CEO again six months later. In 2016, Rad left the role of CEO yet again and moved on to become chairman. Greg Platt then assumed the chief executive officer position post-Sean Rad reign.
NEXT: After threatening to grab a sniper rifle and off the newly elected president, everything went wrong for this founder and his company.
24. Matt Harrigan — PacketSled
We all say things we regret — especially when it goes viral on the Internet. That’s what happened to cyber security company founder Matt Harrigan when he went on a drunken rant on Facebook. The night of the 2016 election, Harrigan threatened to get a sniper rifle and murder president-elect, Donald Trump.
He then resigned as CEO of Packetsled in 2016 — a company he founded in 2013. It’s likely that plenty of people have made death threats against political figures but Harrigan got caught. His home address went public, forcing his family to live elsewhere.
NEXT: Every shoe you can imagine is available on this founder’s e-commerce site.
25. Tony Hsieh — Zappos
Experimenting can be a good thing because it could lead to new, great ideas to run a business better. However, Hsieh’s experimenting with a method called “Holacracy” didn’t work very well, says Entrepreneur. Described as a controversial system, Holacracy involved not having any managers or titles. Fourteen percent of the staff quit.
The major staff loss happened post-Holacracy, suggesting this wasn’t a good organizational system to incorporate at Zappos. Entrepreneur says the rest of Hsieh’s staff is trying to figure out what their pay and jobs are. Quite a unique work situation…
NEXT: Harrigan wasn’t the only one that flipped out when Donald Trump won.
26. Dave McClure — 500 Startups
The angel investor had a very public meltdown triggered by Hilary Clinton not winning the presidential election. A lot of people were very bummed about this, but McClure demonstrated his grief onstage in Lisbon, Portugal in front of about 7,000 people. The moderator, Laurie Segall of CNN, tried to steer the conversation back to tech to no avail.
“What do you mean bring it back to technology? This is the whole of f***ing humanity!” McClure responded to Segall. Entrepreneur’s article about Dave McClure’s outburst expressed a lot of disappointment in the leader.
NEXT: He allowed unqualified salespeople to sell health insurance to small businesses.
27. Parker Conrad — Zenefits
Entrepreneur says that Parker Conrad’s company Zenefits encouraged a very aggressive sales culture. That’s fine, but what’s not OK is the fact that Conrad skirted around state regulations. Unlicensed salespeople at Zenefits were selling health insurance to small companies — a big no-no that could potentially harm lots and lots of people.
Due to this maneuver, Zenefits founder Parker Conrad decided to resign from his post as CEO in 2016. The company itself also suffered — its private valuation declined a whopping $2.5 billion. Once it was touted as high-flying and one of Silicon Valley’s hottest startups. Not anymore…
NEXT: This company founder pleaded guilty to two counts of battery against an ex-girlfriend.
28. Gurbaksh Chahal — Gravity4
Gubaksh Chahal (right) talks with now disgraced TV host Charlie Rose at TechCrunch in 2011. What they both have in common is that they both have faced allegations of sexual misconduct. A judge found that Chalal had violated his domestic violence probation in 2016, so he stepped down as CEO of Gravity4.
His sister, Kamal Kaur, took over his role as chief executive officer. She’s worked with him in other companies before, says TechCrunch. That includes BlueLithium and being VP of mobile of RadiumOne. (FYI, Chalal was also pushed out of the CEO role at RadiumOne.)
NEXT: This company tried to raise funds on Kickstarter for a special kind of drone.
29. Ivan Reedman — Torquing Group
Torquing tried to raise funds on Kickstarter to build a drone like the one seen here. Torquing Group surprisingly managed to raise over a whopping $3.4 million from 15,000 supporters for their promising product, the Zano drone. At the time, that was a record for a European Kickstarter, says publication Entrepreneur.
The product was touted as a portable, mini drone that can take aerial photography and videos. It was all very exciting. Then, Torquing Group told its thousands of backers that it’s shutting down. The Verge reported that they’d shipped over 600 drones as of 2015 to backers.
NEXT: Bloomberg alleged that this founder bought up his own product to inflate sales figures.
30. Josh Tetrick — Hampton Creek
This company is known for creating a vegan version of mayo called “Just Mayo.” The product stirred much excitement because it claimed a 30-ounce jar saved 80 gallons of water. With “going green” extremely popular among consumers, environmentally friendly foodies and investors alike were very interested in Just Mayo. Then, a report from Bloomberg came out in 2016.
The August 4 article says that Hampton Creek ran a secret operation to buy up its own mayo to inflate sales prices. A second article says that a consulting firm hired by Hampton Creek found numbers different from what was originally found regarding environmental impact. Really folks, you don’t need to go to the movies to find drama — you can just go to Silicon Valley.