Thursday, May 21, 2009

Would You Hire This Guy?

There must be a real shortage of quality executives out there because the guy in this picture, Sol Trujillo, an American businessman who recently returned to the States, actually thinks he's going to get hired by another American corporation because he's good at "fixing" broken companies.

For any non-Australian readers, Trujillo's name probably won't ring a bell. But, here in Oz, Trujillo had, until a few weeks ago, been running Telstra, the largest telecommunications company in the land.  It's Telstra that takes at least $300 a month from my pocket in return for a somewhat crappy iPhone service, our meager home telephone service (we pay for every phone call in addition to a $30 monthly fee), and providing internet service at a premium price. This is also the same company that had its Board of Directors meeting in Las Vegas last summer, while the current financial crisis finally started to have an impact here.  And Telstra is the company whose shares have dropped nearly 38 percent during Trujillo's tenure.  If Telstra had any real competition in this country (like the kind that goes on in the U.S., for example), I am certain it would be out of business by now.

Yes, Trujillo was recently forced to leave Telstra after breaking it (maybe this is why he's an expert on fixing broken companies?). During the four years he ran Telstra, however, he earned more than $30 million (US$21 million).  Now he's back in America, and according to an article in today's Australian, he's trying to defend his record at the company: "I don't know if you noticed that there is a global recession going on and we have outperformed the ASX [the Australian stock exchange] in total shareholder return."

Geoff Elliott, who wrote the article, then points out in the next paragraph: 
From the day Mr Trujillo started on July 1, 2005, to the day of his departure last Thursday, Telstra shares have fallen 37.8 per cent compared with a 13 per cent fall by the benchmark S&P/ASX 200 index. Based on total shareholder returns, which takes into account dividend payments, Telstra shares have underperformed the wider market by 18 per cent, according to Bloomberg data.

Since the peak of the stock market in late 2007, the S&P/ASX 200 is off about 44 per cent, while Telstra shares are down just 32 per cent. Still, Telstra shares never moved more than a few cents past the $5.06 mark when Mr Trujillo joined the company and closed yesterday at $3.21.

And this is how someone earns $30 million in four years?  Running a sub-standard company that doesn't even benefit its shareholders, let alone its customers? Fortunately for Trujillo's successor, most Australians don't seem to know how substandard their telecommunication services are compared to the rest of the industrialised world, and therefore expectations are pretty low that it's ever going to get better here.

After digging around a bit, I discovered that before he came to Australia in 2005, Trujillo was the CEO of US West until a hostile takeover by Qwest in 2000. Then he became the CEO of Orange, the French telecom, which has an infamous reputation as an ISP provider in the UK. He's still on the Board of Directors of Orange today.  Gee, I sure hope that someone asks to see Trujillo's resume before he's allowed to "fix" his next company.  


Anonymous said...

I'm not sure it's quite right to say that people are unaware of how crappy Telstra is. It, along with the big banks, is one of the most complained about companies around.Maybe not most, but I imagine many Australians are aware that Australian Business seems to do oligopoly very well, and we have to deal with all the consequences of that. It's particularly annoying when a profitable public company is sold off, and it then becomes a ruthless monopoly with little consideration for its customers.

The Prof said...

I didn't mean to imply that people are unaware of how crappy Telstra is. In fact, as you state, people I know complain about Telstra all the time, and that's why Trujillo is so well known here. My point is that Australians are largely unaware of how their telecom services are still very much behind those of other countries, due to Telstra being the main provider (and controller of much of the wholesale business too). When Aussies travel to other countries, I think they are surprised to discover how much faster the internet is there, for instance (even in Croatia!). And paying for metered downloads, being charged for checking voicemail, etc., also suck! Hopefully, Rudd's new fibre optic initiative will help bust up some of these consequences of being a monopoly for so long.