Here is fairly one-sided op-ed piece from the NY Times that praises ARM's CEO for resigning (without severance) because he disagreed with the bankruptcy move.
It certainly is a twist to see a CEO resign, without the benefit of a Golden Parachute
, but the author's cynicism is certainly selective.
I have no reason to believe Mr. Arpey is not a principled individual and I commend him for not seeking severance. He is a very wealthy man however, and is not departing ARM without some benefits (e.g. a pension worth $4.5M). Still, no matter why he resigned, a greedier man would have insisted upon and most likely receive some sort of parachute.
While I don't question the sincerity of his difficulty with the idea to "simply walk away from your circumstances," having sat at board and senior executive meetings over the years, I suspect this was not the only reason for his resignation.
Mr. Arpey had been resisting the suggestions to file for bankruptcy protection for some 8 years. After three years of losses and 2011 projected to result in a $1 billion loss for ARM, the suggestions took on a greater sense of urgency, particularly since competitors that earlier had availed themselves of the bankruptcy protection route returned to profit in 2010.
ARM's labor costs were almost 10% higher than its competitors and the Airline has indicated the divide is something like $800 million. That's not chump change.
Arpey had been seeking concessions from the unions since 2006; with no success, and there was no reason to believe that if he won the argument with his board yet again, that negotiations would have been more fruitful.
A company cannot sustain $1 billion annual losses for long.
His having lost this most recent round of debate, can only be considered a major defeat, and once CEOs suffer major defeats at the hands of their boards their tenure is in jeopardy...either because the board has lost faith in them or their egos can't stand the loss. This is a very important dynamic in the situation which the author of the op-ed piece chose to ignore.
The author of the piece makes it clear what he thinks of America's business leaders by suggesting Arpey is the last American CEO to have integrity. This is an absurd comment even though we have seen too many examples of the worst, such as Jon Corzine of MF Global, Stan O'Neal of Merrill Lynch, Bruce Karatz of KB Home, Franklin Raines of Fannie Mae, and Dick Fuld of Lehman Bros.
During the last four years of his leadership, ARM has lost a lot of money, and he was unsuccessful in addressing the company's highly uncompetitive labor costs.
If we concede that the bankruptcy protection route is, in some way, unethical or immoral (albeit clearly legal), and Arpey was correct to resist it, what was the likely future of ARM? He had 8 years to chart a path for ARM that would avoid bankruptcy and still result in a profitable company. He failed to do so and so unless one believes it is impossible to turn a profit in a principled manner then the only conclusion that can be reached is that Arpey was an ineffective CEO and, arguably, should have stepped down sooner.
There is likely no shortage of people with some responsibility for ARM’s current situation and that runs from the Executive floor to the Labor Unions, but Arpey had the reins, was handsomely compensated for holding them, and deserved to take this fall.
The fact that the board asked Arpey to stay on is typical corporate PR. Boards rarely if ever have any desire to rub a CEO’s nose in the dirt, and they will typically issue press releases that suggest that if there was a problem, it was a minor one. Usually the dumped executive gets to say he is interested in new challenges, but having lost the battle, and remaining firmly against the plan there was no way that he could remain CEO. It appears that whether through integrity or ego (or more likely a combination of both) Arpey realized this and took the most honorable way out. Good on him.