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The hubris list
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December 31, 2001: 2:01 p.m. ET
For some companies with attitude, pride goeth before a big fall in 2001.
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NEW YORK (CNN/Money) - You shouldn't make fun of the misfortune of big corporations. Sure, it's kind of karmic to see big, arrogant outfits get their comeuppance. And there is satisfaction in clucking "tsk, tsk" and reflecting on the virtues of clean living.
But it's important to remember that a lot of mom and pop investors and hard working employees get burned when the boardroom blunders.
Nevertheless, the end of the year is the time when folks survey the year's corporate history and tote up the failures. There are several that stick out in my mind as particularly poetic - the consequence of corporate hubris, so to speak.
PSINet is first on my loser list. Think it's a good idea to use your competitor to handle your business? Well, that was the whole game for CLECs (Competitive Local Exchange Carriers). Owing to various regulatory changes, these telecom middle men could set up their own Internet service ventures by renting the copper lines owned by Baby Bells. Of course, Baby Bells have their own Internet services to offer. So why was anyone surprised that Baby Bells didn't help CLECs improve and expand service? Without that growth, many CLECs went belly up.
Why is PSINet more notable than some of the others? It put its name on a stadium - a stadium that was home to the Baltimore Ravens, Super Bowl champs. Sure, at the time of the Internet bubble it seemed like a marketing coup. But the $105 million PSINet spent on the stadium name might have helped last July when it filed for bankruptcy protection. Apparently a name on a stadium doesn't get people to sign up for Internet service.
In fact a name on a stadium, in suitable Edgar Allan Poe fashion, seems to mean a curse. Witness my second loser, which also has its name plastered on a stadium: Enron.
The details behind what led to Enron's bankruptcy Dec. 2 are still emerging, but its clear that its executives played fast and loose with some of its deals. For Pete's sake, the company's chief financial officer was doing deals with companies that he had an ownership interest in. And just because you are adept at energy trades, which Enron was, doesn't mean you should get into the hedge fund game, which Enron apparently did. Now there's a lot of finger-pointing going on.
The debacle that was Lucent during 2000 should earn it a spot throughout 2001. It was on my list until a few days ago, when details of its executive pay packages came to light. The salaries are relatively light by Corporate America standards - bonuses are non-existent and stock options are truly based on improvement. It seems the new bosses there are being a little bit humble in the face of the Street's fury. Still, it burns me that Richard McGinn, the CEO during the company's meltdown, will get a cash payment of $5.5 million.
Xerox has the same sort of chance as Lucent to get its house in order. But it's not quite there yet, so it remains on my loser list. The once high-flying company is still sorting through the trouble caused by a "change for the sake of change" reorganization of its sales force the year before. It's been forced to sell some assets and is borrowing money to keep operations going. Most of that money is coming from GE Capital. It vaguely reminds me of various "Sopranos" episodes where someone ends up owing Tony so much that Tony just takes the business.
But Xerox will never get to that point, right?
Rounding out the list, of course, is Sotheby's. It had its own Greek tragedy played out in the headlines this year. Ultimately its chairman, Alfred Taubman, was convicted of price-fixing, mostly on the basis of testimony from Diana Brooks, his lieutenant. Why is it the rich always feel the need to be richer?
Who's going to make the loser list next year? If I knew for certain, I wouldn't have to spend my time writing this stuff. But Hewlett-Packard and Compaq seem like good bets. Their proposed merger, which the Street has been decidedly lukewarm on, has run into resistance. If the deal folds, look for serious corporate flailing.
Arthur Andersen may make the list as well. It already has a worrisome trifecta of accounting embarrassments dogging its credibility as an auditor: Enron, Waste Management and Sunbeam. In all these cases the auditor blames management but ... you have to wonder when it happens over and over again.
Finally, Gap is looking like a contender. Once the cutting edge of retail, the company, which runs Gap, Banana Republic and Old Navy stores, seems to be getting more and more out of touch. It seems to be a developing lesson in a trend reader mistaking itself for a trend setter. 
Allen Wastler is managing editor of CNN/Money.
Click here to send mail to Allen Wastler
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