Pretend for a moment that you haven’t already read the headline of this story. Also pretend that, based on that headline, you’re not familiar with the subject I am about to address.
Seriously, pretend that you’re a business leader coming back from vacation, where you kept your phone off, avoided television at all costs — especially business news — and essentially are crawling back out of a dark hole you were in for a week.
Now, consider these financial figures from two public companies, A and B. Both make cars and are considered competitors. Again, and this is essential, pretend like you don’t know where I’m going with this — even though you probably do, because I sort of gave it away in the headline.
- Company A in 2016 posted revenues of about $151 billion. Company B posted revenue in 2016 of $7 billion.
- Company A delivered about 6.6 million vehicles last year. Company B delivered roughly 76,000 vehicles.
- Company A reported a net income of $4.6 billion in 2016. Company B reported a loss of $800 million.
- Company A, as of April, boasted a market capitalization — stock price multiplied by shares outstanding — of $44.8 billion. Company B boasted a marketing capitalization of $51 billion.
Which company is the better-performing company?
Just looking at these figures, it would be hard to bet against Company A. It produced solid revenue, delivered a hefty amount of product to market, reported a healthy annual profit and boasts a respectable market capitalization.
Meanwhile, Company B produced far less revenue, delivered a fraction of its product to market, reported a deep loss for the year, but somehow has a market capitalization higher than Company A.
Now, consider this question: If I told you one of these companies fired its chief executive officer this week, which one would you pick?
Ok, so maybe that was sort of a lame exercise. Because unless you’ve been living under a rock for the past week, you’ve likely gathered that I’m talking about Ford Motor Co., or Company A, and Tesla Inc., Company B.
On paper, it’s hard to argue that, today, from a pure financial perspective, Tesla is a better-performing car company than Ford. Tesla, the headline-grabbing, cool high-growth disruptor in the industry, delivers a fraction of its electric cars to the market compared to Ford’s traditional gasoline-powered vehicles, has nothing close to the revenue Ford produces and is operating at a major loss.
Ford, on the other hand, was solidly profitable last year on revenues nearly 33 times that of Tesla. But on Friday, May 19, 2017, Ford fired its CEO, Mark Fields, after just three years running the historic car company.
That’s a question I’m probably not personally equipped to answer. Media outlets have speculated that a number of factors likely pushed Ford’s board to remove Fields, a 28-year company veteran, in favor of promoting Jim Hackett, an industry outsider who joined Ford’s board in 2013 but has recently led the company’s new Smart Mobility unit.
Despite delivering record profits and jump-starting new businesses in Europe and China during Fields’ three-year tenure, Ford has seen its stock price drop by nearly 40 percent under his watch. I’ll take that as a sign that Wall Street didn’t believe the company was equipped under Fields to take on upstarts like Tesla, whose high market cap rests almost entirely on the idea that it is on a more solid path to reinventing the industry based on newer and more sustainable technology. Ford’s shares trade at about $11 per share; Tesla’s shares trade at about $300.
But on a deeper level, Fields’ dismissal from Ford exemplifies the cloudy nature of CEO firings.
Here you have a company with arguably impeccable fundamental metrics. Record sales and profit on your home turf, with new business blooming across the globe. Moreover, like Telsa and others in Silicon Valley, Ford — along with competing legacy automaker General Motors Co. — appeared to be carving out room to invest in a future of self-driving and electric cars. (This is even though, as Business Insider points out, the former is still based on questionable market assumptions and the latter has already proven to be somewhat of a bust.)
To a seasoned business executive, this would seem to be the workings of a capable and talented executive. But it wasn’t enough.
So what does that leave us with to explain Fields’ firing?
All signs point to the sharp stock price decline, most likely driven down by the perception that Ford — an old-timer automaker based outside of Detroit — doesn’t have the cultural chutzpah to innovate at the pace and scale of its talent-rich Silicon Valley competitors.
Meanwhile, Tesla, the company perceived to be on the cutting edge of the technology poised to propel the future of the automobile industry, is bleeding cash; its workers are put through tortuous working conditions to meet its overly ambitious delivery goals; and its CEO, Elon Musk, a tech celebrity, is preoccupied with running an entirely separate company, SpaceX.
Such is woe for today’s chief executives I suppose. Mark Fields had a little less than three years in the corner office at Ford. That’s after rising through the ranks there for almost three decades. He delivered business fundamentals most would fawn over.
But he couldn’t shake the perception, legitimate or not, that he is incapable of leading a more than 100-year-old company to compete with today’s cavalcade of techy upstarts — a threat not unique to Ford or the automotive industry.
Perhaps Jim Hackett can. Either way, all CEOs should take notice.
Frank Kalman is Talent Economy’s managing editor. To comment, email email@example.com.