Monster Hits Rock Bottom: A Dark Fair Tale (How to Run a Successful Company into the Ground and Get Away with the Crime)
Once upon a time there was a happy monster. It lived in a village that no longer exists, in a house that has since crumbled, on the edge of a field where weeds now run the show, where everything was discovered, and everything was possible. A stick could be a sword, a pebble could be a diamond, a tree, a castle, an internet start-up, a billion dollar unicorn.
The monster liked to play and show his funny face for the visitors of its once popular jobs board. It seemed the good times would last forever…
The Bad News Is Nothing Lasts Forever, The Good News Is Nothing Lasts Forever
Unfortunately, this monster has been taking some serious beating lately. And it is time to realize, when the truth stares you in the face and you see it with your own two eyes and feel it within your heart, while you are being completely and utterly decimated by the competition, only a fool does not believe it to be true.
After all, maybe this monster is a fool, and even a blind one at that. But it is supposed to be run by people who have responsibilities and fiduciary duties to the company’s stockholders, employees or at the very least, to their own integrity or reputation. Unless of course they do not have any more ambitious goals, other than to treat the company’s coffers as a personal piggy bank.
The “fail fast, fail often” mantra was not written for losers
You can go on for years running into the ground what was once a successful business, presiding over a massive destruction of shareholder value and a dramatic meltdown of revenues and earnings, while shamelessly enriching yourselves and your buddies from the Symbol Technologies Mafia (the consistent supplier of incompetent top brass to Monster Worldwide over the years). But eventually, all the misdeeds of the egregious corporate malfeasance will catch up with you. And if your defense is ignorance of the industry you actually operate in or being born into the wrong generation (or even on the wrong coast), you are unlikely to get any sympathy from those whom you have caused substantial financial loses. But before seeking forgiveness and redemption for your mistakes however, you have to admit making them.
Down, but not yet out
When you look into the abyss, there is nothing staring back at you. At that moment, you find your character. And that is what keeps you out of the abyss.
It is time for the company’s senior management and the board of directors to address serious missteps in the critical areas of capital allocation, long-term strategy and vision, effective human resources management, executive pay and corporate governance.
As President Lincoln once said: “The dogmas of the quiet past, are inadequate to the stormy present. The occasion is piled high with difficulty, and we must rise with the occasion. As our case is new, so we must think anew and act anew. We must disenthrall ourselves, and then we shall save our country”. The challenges Monster Worldwide is currently facing are not as grand. Nevertheless, they are still enormous considering the sad state of affairs at a company that is still stubbornly stuck in the early days of the internet, pretending to run some form of an archaic newspaper classifieds ads pages, while imprudently refusing to accept the fast-changing competitive landscape.
Out with the old, in with the young
As a group of long-term shareholders in the company, we are proposing a new corporate strategy for accelerated growth. The time is running out for Monster Worldwide, and so is the patience of its owners. We can no longer sit back and idly watch as ignorance and inertia sabotage the once successful and growing business.
The company should immediately start implementing several initiatives that would finally let it become a technology pioneer and subsequently emerge as a new powerhouse in the human capital development industry (the industry it would have to re-define and dominate). Time has shown that merely running one of the many online job boards in the over-saturated market is not a good long-term strategy in the rapidly changing world. Companies have to keep constantly adapting to the current environment in order to survive and thrive.
The problem is change: The more rapid the pace of change, the more dire the consequences of stubbornly sticking to old ways. Today’s pace of change in business conditions is certainly astonishing. But like most things in life, rapid change is a two-edged sword — a threat but also an opportunity. Adapt to rapid change better than competitors and you can make great strides in controlling your own destiny; ignore rapidly changing circumstances and expect to go the way of the dinosaurs. Adapting may be difficult, but it is not impossible. But the first and probably the most important step is actually admitting that you have fallen asleep at the wheel and did let others pass you by.
Denial is a psychological state where the afflicted refuses to accept a harsh reality. The belief that all will be well in the enterprise if you just give it time is a sure sign of denial. Another sure sign is the belief that business conditions have not changed, or at least have not changed enough to matter. That things will improve in your business by default, as long as the economy improves and “the right” economic cycle comes back around. Denial is recognized as a necessary stage in grieving the loss of a loved one. But it has no place in the running of an enterprise.
In a world that is changing so quickly, the biggest risk you can take is not taking any risk at all. The best antidote for rapid change is competence, laser-focus and energy in the executive suite, where the tired, cynical and stubborn can do huge damage very fast.
Restructure to adapt (or sell out to the lowest bidder)
Alfred P. Sloan, the legendary architect of General Motors, once argued that strategy followed structure. Sound strategy, and by extension sound execution and performance, is unlikely to flow from a badly designed organization. The faster the pace of change, the more important it is to continually monitor and upgrade corporate structure. In times of rapid change, it is especially important to be sensitive to structures that stifle initiative and innovation, frustrate communication and reward process over performance and output. Enterprises can ignore structure at their peril. But the trouble is, structure is easy to ignore because a poor structure is not as obvious in an impending crisis.
Rapid change exposes questionable ethics and poor corporate governance. It also creates urgency and pressure; enterprises that are not properly prepared and organized struggle accordingly.
For organizations that are well managed, well financed, responsive and nimble, rapid change is just what is needed to take advantage of opportunities. The status quo or stagnant markets make it tough for the incumbents or the small to take on the established. Rapid change however, puts everything up for grabs. For any given decision that you are going to make, there is an upside, but also a downside. But on aggregate, if you are stagnant and you are not willing to make the necessary changes, then you are going to fail and not catch up with the times (or with the competition).
When the business history of this era is written in the distant future, there is a good chance that adaptability will be the characteristic that ultimately most distinguishes successful from unsuccessful enterprises. Businesses should assess their capacity to adapt, and where it is needed, should take immediate and aggressive action. A slow approach to change will not work in the current fast-changing business environment. The edge lies with those who see change more as an opportunity and a challenge than a threat.
When the famous psychologist Carl Gustaf Jung talked about the “thousands of years of struggle for adaptation and existence,” he was talking about humanity. However, he could have been talking about survival in business just as well. If you do not adapt to changing circumstances, you will cease to exist. The only question is when. It is that simple!
A separate detailed document presents various aspects of the proposed changes to the corporate strategy and a list of fully-developed product line. Taking action on our proposal is absolutely paramount, so the company can not only survive in the current challenging environment, but also reclaim its leadership, and subsequently recover and grow the lost shareholder value.
Specifically, we propose that the company splits into/creates the following separate business divisions and allocates its resources accordingly:
- Online jobs advertising board (the main legacy business), with creation of additional industry-specific websites
- REDACTED on 09/14/2016
- REDACTED on 09/14/2016
- REDACTED on 09/14/2016
- REDACTED on 09/14/2016
On top of the extensive corporate restructuring proposal, we also insist that the company takes all appropriate measures to preserve the remaining cash and reduce operational expenses. This is necessary until a new productive capital allocation plan is developed and implemented that would take into account the impending changes to the core corporate vision, strategy and operational practices. Companywide hiring freeze should also be instituted as part of an urgent review of human resources allocation and performance. Particularly in light of the rapidly declining revenues and therefore, extremely low sales-per-employee ratio.
All of the above steps should put Monster Worldwide on a solid path to recovery and its stock to much more than where money goes to die!
RECENT DEVELOPMENTS: On August 9th, 2016 Monster Worldwide announced that Amsterdam-based staffing agency, Randstad Holding NV will be acquiring its assets for about $429 million or $3.40 per share in cash. At the time, the company and its board of directors also issued a formal recommendation to the shareholders to accept the lowball tender offer. This event is just another proof of cronyism, incompetence and a complete disregard for shareholders and their interests that have dominated the corrupt culture of the run amok top brass at the terribly mismanaged company.
We genuinely hope that the vast majority of shareholders will see this charade for what it is, a thinly veiled, desperate attempt by the senior officers to hold on to their cushy jobs (as well as no longer having to participate in the embarrassment that the Monster’s quarterly conference calls have become), while leaving the company’s shareholders holding the metaphorical bag.
The proposed transaction grossly undervalues the company, especially given the facts that the company’s 52-week high is $8.23 and only less than a year ago, Monster was aggressively repurchasing stock at an average price of $6.03 a share. And would result in no real gain to most shareholders. If anything, it would actually materialize the already substantial paper losses to long-term shareholders who have stuck with the company over the years watching in disbelieve the colossal waste of the inherent potential and the squandered opportunities.
Only several short months ago, the company’s management expressed a strong interest in acquiring smaller companies using cash, while indicating that the company’s stock was way undervalued in order to use it for acquisitions.
And as recently as on May 5th, 2016 during the Q1 earnings conference call, Timothy T. Yates (CEO, CFO and Director) reiterated the previously stated guidance for the full year 2016 of cash EBITDA:
“Looking at the full year, we continue to guide to cash EBITDA of $85 million to $100 million.”
Assuming this guidance still stands and the business did not completely collapse overnight (considering Monster Worldwide is not a one-product biotech company with a failed FDA drug trial), the proposed takeover is nothing but a blatant attempt to steal the company from its shareholders. And get away with the crime!
P.S. On August 24, 2016 the company’s management issued an open letter to shareholders in response to the filing of August 19, 2016 by MediaNews Group (“MNG”) where it announced a major stake (11.6 percent) in Monster Worldwide and protesting the low take-over price while also asking for urgent measures to recover the lost shareholder value.
If there was not enough clear evidence already by now of the company’s management and the board of directors’ complete incompetence and inability to run the once successful business. We now basically have an open admission of this signed by Timothy T. Yates who had the audacity to claim that any opposition to the buyout is “reckless”.
The following points can be deciphered from the letter:
- There is a very little chance that the shares would be worth anything higher than $3.40 in the future (this is implied by contradicting the MNG’s assumption of higher share price within the next 18 months if certain proposed steps are taking by the company)
- There is no reason to cut expenses and/or capital expenditures when you are faced with rapidly declining revenues since “more than $100 million of annual operating expenses have already been cut over the past several years” and “capital expenditures have already been cut by about 50% over the past several years”
- The management team feels completely and utterly clueless as to how to compete with “companies that are owned by substantially larger and better capitalized parents that can afford to compete aggressively on product pricing in pursuit of market share”. So, a potential “parent” with deep pockets came along who can be milked now instead of the sucked dry Monster shareholders. All while still pursuing the same failed strategy, but the management gets to keep their high-paying jobs
But what is even more telling is the way the failed management team proudly displays its deceiving fatalism by siding with and quoting a securities analyst from Avondale Partners who recently blurbed: “We contend that termination of the Randstad offer would be disastrous for MWW shareholders.” Sticking to defeatism while conveniently ignoring many other analysts who have issued a target price of as high as $7.50. The company’s senior management apparently suffers from some form of “the bipolar financial guidance disorder”, where the only interest it chooses to promote is that of greed and the ongoing pursuit of personal profit. Guiding higher with “optimistic outlook” quarter after quarter when forced to save face, and blatantly manipulating the shareholders expectations to the downside when seeking approval for the ludicrous takeover proposal.
In light of the latest developments and the disastrous performance leading up to the current debacle the company finds itself in, we strongly urge all of the senior management at Monster Worldwide to stop embarrassing themselves and resign from their jobs effective immediately. This should at least prevent any further damage being done to the already struggling company that is completely lost in the labyrinth of confusion with its management only capable of an occasional “foot in mouth” moment while continuing to give ammunition to those who are currently considering filing a class action lawsuit against the company. As well as initiating a derivative action against the company’s officers and directors.
To paraphrase the great late U.S. Representative and scholar Barbara Jordan who stirred the nation with her Churchillian denunciations of the Watergate abuses of President Richard M. Nixon. And to apply her passionate words not only in defense of the Constitution, but this time in defense of the basic shareholder rights. In defense from those who seek to undermine trust in the very foundation on which our capital markets operate. From those who foster lies, secret dealings, nepotism, cronyism, uncontrolled greed in pursuit of their questionable goals. From those who easily breach their fiduciary duties and commit white collar crimes while thinking ‘RICO’ and ‘Racketeer’ are some cute cartoon characters. From those who think the State of Delaware with its lenient and flexible business statutes is not only a great jurisdiction for honest corporations, but also a convenient hiding ground for the unscrupulous operators who believe that shareholders solely exist as the necessary evil. As some voiceless and disposable fundraising tools…
“Today I am an inquisitor. An hyperbole would not be fictional and would not overstate the solemnness that I feel right now. My faith in the Investor Protection Laws is whole; it is complete; it is total. And I am not going to stand by and be an idle spectator to the diminution, the subversion, the destruction, of the shareholders rights by the few who seek unjust enrichment at the expense of the many humble, naive and idealistic”.
Today I am an inquisitor. But who can so properly be the inquisitors for the company as its shareholders and therefore the owners of the company themselves?