An illustration of Zynga Chief Executive Mark Pincus is seen at the "All Things D" conference in Rancho Palos Verdes, California, in this May 30, 2012 handout photo. (HANDOUT/REUTERS)

Most reports about business leaders—whether they come from academics, journalists, or consultants—tend to focus on the best cases, with lengthy attempts to explain why a particular company or its leader has been successful.

But what about the worst? All too often, glaring examples of business leadership gone wrong get pushed aside, tossed into the dustbin of history with little reflection on how others might avoid similar fates. If failure really is a better teacher than success, then we’re wasting a chance to learn from the corporate world’s many management mistakes.

That’s why, for more than a decade, I’ve been more interested in studying executive and organizational blunders and breakdowns. There has never been a shortage of cases, and 2012—a year marked by a slowly recovering economy, an election that had many CEOs putting decisions on hold, and crises ranging from banking scandals to continued problems in the euro zone—was no different.

At the end of every year, I like to go through the exercise of coming up with my own top five list of the worst CEOs. It’s not scientific, but I do tend to consistently ask three questions: Did the CEO’s company suffer a precipitous drop in performance, as indicated by its stock price, cash position, market share or other key financial metrics? Was the CEO culpable, in that he or she knew what was going wrong yet was unable to right the ship? And finally, did the CEO’s actions, or inactions, provide evidence of a significant breach in corporate governance or strategic leadership?

With that in mind, and with an eye toward what we can learn from their failures, here are my nominations for the five worst business leaders of the year.

5. Rodrigo Rato of Bankia

I’ll start with Rodrigo Rato, the former chairman of Spanish financial giant Bankia. The ongoing banking crisis in Spain precipitated many changes, one of the most important being the formation of Bankia from a merger of seven struggling Spanish banks. Rato, a former managing director of the IMF and finance minister in Spain, was tapped to lead the new bank. His tenure lasted two years, but not before greatly damaging his previously positive reputation.

What happened? While putting together the new bank’s IPO, Rato sold the stock to thousands of small investors. They ended up with deep losses when the government was forced to bail out Bankia after the bank’s auditor, Deloitte, refused to sign off on the bank’s books. An initially reported annual profit of 300 million euros became a loss of nearly 3 billion euros after Rato’s resignation. As someone who should have known the real financial picture at Bankia, Rato is starting to look to me almost like former Enron CEO Ken Lay, who touted his company’s stock all while the company was deteriorating. Rato is currently under investigation for fraud. 

4. Mark Pincus of Zynga

The fourth worst CEO on my list is Mark Pincus of Zynga, the maker of games like Farmville that were ubiquitous on Facebook for a while. But the year 2012 was a disastrous one for Pincus. His company’s shares are down about 70 percent this year, there has been a big exodus of top executive talent, and Pincus spearheaded a pricey $180 million acquisition that forced a writedown of 50 percent of the purchase price within months. Zynga has relied almost entirely on Facebook for distribution of its games, the type of dependence no future-minded CEO would want. The recent announcement that both companies have freed themselves to create new partnerships highlights the vulnerability of this strategy.  Finally, Pincus sidestepped lockout provisions to unload millions of shares, a controversial move but perhaps a sign of what he thought about the company’s prospects.

3. Andrea Jung of Avon

This year also spells the end of Andrea’s Jung’s career at the top of Avon after a string of missteps that has me putting her at No. 3 on my list. Avon’s performance has been on a downward spiral for several years, and Jung’s marketing know-how hasn’t been enough to overcome her weak operational skills.  Avon has had poor results in key global markets, the heart of Jung’s strategy for righting the ship. An investigation into possible violations of the Foreign Corrupt Practices Act has cost the company hundreds of millions of dollars. To be fair, Jung does not deserve all the blame. The board has stuck with her over the years, perhaps entranced by her celebrity status. But with third-quarter earnings down 81 percent, the dividend cut by three-quarters and the stock down 19 percent on the year, Jung’s successor, Sherilyn McCoy, has her work cut out for her.

2. Aubrey McClendon of Chesapeake Energy

The second worst CEO of 2012, in my book, is Aubrey McClendon of Chesapeake Energy. An aggressive visionary who has benefited from the growth in hydraulic fracking, McClendon seems unable to keep his corporate job separate from his personal investments. In 2012 he personally borrowed $500 million from a company that is a major investor in Chesapeake. He ran a private $200 million hedge fund trading oil and gas even though he is CEO of a company in the same industry. Corporate jets are routinely used for personal purposes. To me, these actions demonstrate bad judgment and potential conflicts of interest, and lead to understandable concern from shareholders.

1.Brian Dunn of Best Buy

Finally, I believe the worst CEO of 2012 was Brian Dunn of Best Buy, who left the company in April. Under his tenure, Best Buy’s share price declined more than 30 percent, with much of that occurring in the last two weeks of his leadership. The Dunn turnaround strategy had multiple problems, such as believing cost-cutting would cure everything as the company has become the showroom for Amazon. Converting big-box stores to smaller units might reduce overhead, but it doesn’t solve the essential problem that customers can often find much better prices for the same products online. Dunn also emphasized up- and cross-selling rather than improving basic customer service and online offerings. He continued the policy of buying back shares to support the stock price even though fundamental problems with strategy were actually pushing share price down. Finally, in the midst of all this turmoil, allegations of an inappropriate relationship with a 29-year-old subordinate came to light, leading to his resignation from the company.

That’s my list for 2012. Whom would you add?

Sydney Finkelstein is a professor of strategy and leadership at the Tuck School of Business at Dartmouth College, and the author of Why Smart Executives Fail .” The list reflects his opinion.

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