The Notorious Career of Al Dunlap in the Era of Profit-At-Any-Price by John A. Byrne
The early nineties witnessed the fallout from the highly leveraged takeover scene of the eighties and an intense re-structuring of corporations. There’s a name for this when it’s done with matches — arson. But a company can be burned down more thoroughly by calling in someone like “Chainsaw” Al Dunlap. One good year pushes up market value, which brings out suckers. Sell the company to the right sucker, who’s then on the hook for the inevitable earnings downswing.
As John Byrne makes abundantly clear in this scathing survey of Dunlap’s stint at Sunbeam, that was precisely the plan.
Dunlap has given a version of his life in his own book, Mean Business, but Byrne reveals the truth. Not the Hoboken street tough he portrays himself as, Dunlap came from a middle-class background and attended West Point. But he had a cruel streak: he refused to attend his father’s funeral but pocketed the piddly insurance money, though his own net worth was about $300 million at the time.
He was a clever toady and assumed increasingly high profile positions in the eighties. In 1994 he became CEO of troubled the Scott Paper company, where he hectored management, cut employees, and cemented the loyalty of a circle of subordinates with lavish stock option packages. The latter was a nice touch, since it made short term gain desirable for management, rather than building long term value.
The devil’s deal worked; when Kimberly-Clark took over Scott, Dunlap’s team bailed with millions of dollars of stock. The year after Dunlap left Scott, the company, now a Kimberly-Clark division, lost $60 million.
Dunlap next moved to Sunbeam, another venerable American brand name that had fallen on tough times. He brought in a team of sycophantic consultants from Coopers and Lybrand, who made a hasty analysis oriented toward satisfying Dunlap’s compulsion to cut jobs. Sunbeam also oversold with generous “send back” provisions: it would appear as if a client had bought appliances, but in reality they had returned most of them. (Sunbeam eventually had to rent a one million square foot storage facility to store the send-backs.)
Dunlap’s other technique was to magnify bill-and-hold sales — clients requested items, and Sunbeam would store the item until the client needed it, and “pre-load” their earnings. After Dunlap was fired in 1997, Sunbeam’s books were audited. The $109.4 million net income Dunlap claimed was restated as $38.3 million—less than Sunbeam made under Dunlap’s predecessor, Roger Schipke.
Byrne is a good journalist, and though he suffers from the prose tics of business journalism (profiles of male execs always feature either military service or football) his portrait of Dunlap and his circle of cronies is devastating. The only courageous figure here is the Sunbeam accountant who consistently confronted her bosses about the accounting problems. Apparently she didn’t need to go through boot camp to learn how to run a company.
CHAINSAW: The Notorious Career of Al Dunlap in the Era of Profit-At-Any-Price by John A. Byrne (Harper Collins)