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Yash Gupta
Business School Dean

Yash Gupta

Yash Gupta is Professor and Dean of The Johns Hopkins Carey Business School.

Why was Wagoner Fired?

This was a poor way for the president to send a message that drastic change was needed. When the government takes the enormous step of asking a top CEO to resign, there has to be an immediate explanation of how the move will prove beneficial. The president hasn't really done that. He hasn't articulated how things are going to be better with Rick Wagoner out and a new executive in.

Perhaps this is largely a symbolic move. Sometimes, symbolism is fine, but change for its own sake carries the risk of appearing capricious. That's not very good for the morale of the workers, the auto dealerships, the consumers, or the markets. Also, it signals to other executives of companies that received TARP money that they're equally vulnerable. The overall effect is a deeper mood of instability and uncertainty.

It's true that when a company is not doing well, the CEO must take responsibility. If the person in charge is not addressing the company's problems in the proper way, then, yes, he should be fired. But that doesn't seem to have been the case with Wagoner. He had put a new plan into operation, and he was well-liked. Besides, GM isn't the only automaker with problems. Chrysler and many others are having a rough time. So, in this sense, it's not entirely clear that Wagoner's firing was justifiable.

When important decisions are made only for political reasons, some part of the population might be pleased. But those generally aren't good decisions. I'm afraid this might sink GM even more. This firing, apparently made without any real cause, can only damage the morale of many people across the board.

By Yash Gupta

 |  March 30, 2009; 5:54 PM ET
Category:  Economic crisis Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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Comments

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It seems to me the new Government is implementing as much "change" as they can as fast as they can before we catch on and start to question them.

The station Wagoner held was taken from him in a naked display of power by Obama. The Dictator in Chief and his henchman tax-cheat-Geithner want to rule over the economy and Smarmy Barney Frank wants to give them the abiliy to implement wage controls. It is all about power.

The fact that the Constitution, a historical footnote to those people, does not permit the President to have such influence over a private enterprise, over the board of directors and the shareholders, is of no consequence to a President who is drunk with power.

Heard on KSFO radio this morning

One
Bad
Astounding
Mistake
America


Posted by: Kenneth2 | April 2, 2009 12:57 PM
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The last post is dead on.. so I'll keep it short. Wagoner was too isolated and not accountable to his share holders, his employees or his brand. If he is to be the poster child for big business reform, then so be it. I'm sure he will be just fine, he will not go hungry. However, other CEO's and their BOD's should take the message to heart. Fix your business model or go home.

Posted by: psjackson-wbp | March 31, 2009 1:56 PM
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The time has come to show your capability and skills or give way to the next guy. Rich (unintended orto) Wagoner heads the biggest failure and the greatest potential for improvement. He has demonstrated failure of an unheard magnitude in industry, and must be replaced. How much of the losses are bad debts tied to financial instruments?

Have "they" selected the right guy to replace him? That remains to be seen. But change starts at the top

Posted by: trauet_1 | March 31, 2009 10:33 AM
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I have no sympathy for Wagoner's out (I believe he should have resigned years ago), but Obama took the short cut in making this convenient political move which has no material effect on GM's ability to survive. Also this move smells dangerously like a government micromanaging a business. As someone from China, I am extremely nervous about government having too much power - their officials, however well intended, just do not have the right motivations to get things right.

Posted by: exBigThreer | March 31, 2009 9:49 AM
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I don't know if we know all the reasons why Mr. Wagoner was run out of town. Press the administration a little harder, and maybe sooner or later they will give a really reasonable rationale.

But I do know, or think I know, that at least one of the auto makers has to go. And Chrysler seems to be the "downest" of the almost out of them all, you know.

My suggestion is to break Chrysler down into its logical parts, and shed them fruitfully. Mr. Wagoner was the first sacrifice, in a symbolic way. And maybe he is fungible. Or, maybe not, these days.

Posted by: paultaylor1 | March 31, 2009 9:48 AM
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I'm surprised at your analysis and objections to the government doing what shareholders and the board of directors should have done a long time ago. If you want to shake up a poorly performing company you start with change at the top. It's sends a message within and outside the company (i.e. Unions and bondholders in the case of GM), that the status quote will no longer be tolerated.

Most people such as Mr Gupta have a problem because it is the "Government" firing Mr Wagoner. When GM asked for and received government money the rules of the game changed. There is no need for the President to justify anything. I'm sure the general public and most executives understand the justification for pushing Mr. Wagoner aside.

Posted by: TJGodel | March 31, 2009 9:19 AM
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Rick Wagoner liked? He was despised by much of his staff and the hard working Americans beneath him. On the executive level he packed the board and top executive positions with his friends to ensure his position was untouchable. He is also the main reason why very little progress was made by GM towards hybrid and fuel efficient cars. Sure, GM has a nice environmentally sound product line coming out next year, but his inactions are a little too late. He is and was a dinosaur, bye, bye

Posted by: joelp77440 | March 31, 2009 8:31 AM
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If the administration had already pressured CEOs of the poorly performing finianical institutions to step down it would have some credibility. Instead what we see is one fall guy.
We see a similar pattern in its treament of AIG. Wall street firms on the dole can pay over a Billion in bonuses without a peep from the president, but if AIG pays 160 million then all hell breaks lose.
Consistency breeds trust. Right now the president is playing favorites.

Posted by: SayWhat4 | March 31, 2009 8:14 AM
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The U.S. government had no business firing Wagnor. It smells of fascism.

I wouldn't dare look at GM with the U.S. government running the company. Can anyone name anything the government has ever run well?

It looks like GM will be history.

Obama needs more Republicans. I cannot wait for the mid-term elections.

Posted by: Maryann261 | March 31, 2009 3:14 AM
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Wow your analysis is so off base. If you look at GM's performance under Mr. Wagoner, in any of the major business disciplines - marketing, finance, operations, etc. - and the company has been an abject failure under his leadership.

Just look at the decline in market share of the company in its home market since Mr. Wagoner took over - it has gone from the mid 30's down to the high teens- according to recent estimates. Yet Mr. Wagoner has fail to provide an adequate response.

This guy should have be fired years ago, but he wasn't because of all of his cronies stacked the board and forgot failed to do the job that they were hired to do.

Posted by: Brigadere | March 31, 2009 1:42 AM
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Poor analysis. Here is a prime example of why business schools have failed. Business Schools & their leaders are poor business leaders. They are best at creating inefficient/poor academic models & leaders. These schools have failed us ! Their arguments are hollow and without merit.Poor business results = Fired Board & CEO.

Posted by: hellowashington | March 31, 2009 12:23 AM
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Why was Wagoner forced to resign?

On the Board of Directors since 1998. Chairman and CEO since 2003.

Let's look at the numbers (Net Income)
1998____$389 Million
1999____$1.92 Billion
2000____$4.5 Billion
2001____$601 Million
2002____$1.7 Billion
2003____$3.8 Billion
2004____$2.8 Billion
2005____$2.39 Billion
2005____($10.4) Billion Restated Loss
2006____($1.98) Billion Loss
2007____($38.7) Billion Loss
2008____($30.8) Billion Loss

What is it you're not understanding about running a corporation? HELLO!!!!!!!!!!

Posted by: helloisanyoneoutthere | March 30, 2009 11:32 PM
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