Chainsaw: The Notorious Career of Al Dunlap in the Era of Profit-at-Any-Price

by John A. Byrne

At once praised as the darling of Wall Street and condemned as the foe of the working people, business executive Albert J. Dunlap--"Chainsaw Al"--is clearly one of the most controversial figures in American business. This is the story of Dunlap's rise and fall. It reveals a notorious career that left a wake of fired employees, shuttered plants, devastated communities, gutted companies--and, often, enriched shareholders. First breaking into the headlines with his draconian, expense-slashing firings at Scott Paper--and the subsequent boost in the value of the company's stock--his legend grew as he took on the task of turning around troubled Sunbeam Corporation. There, at the height of his career, Dunlap became a household name, lauded as the hero of the American investor and role model for managers. But the darker side of the Dunlap legend began to emerge as questions arose about his methods and motivations. Was he selling out the company's future for quick, short-term gains? Did his plant closedowns make business sense, or were they done to impress the Wall Street analysts? Were his massive restructuring improving the company's competitiveness or just inflating the value of the stock and his own net worth? Was his harsh treatment of employees a justifiable business tactic or the symptom of egomania? Eventually he is brought down by the virtual collapse of Sunbeam, investigators of accounting and business practices, and the subsequent restatement of Sunbeam's finances. As Chainsaw makes clear, Dunlap's relentless and destructive drive for profits is symptomatic of our times and Wall Street's insatiable greed. Written by John A. Byrne, the distinguished Business Week journalist, Chainsaw reaches deep inside the world of business as it's practiced today. It's filled with players you'll recognize from the business headlines. And, throughout, you're a fly on the wall, witnessing the conversations and dramatic moments--everything from Dunlap's first get-together with Sunbeam executives, where he humiliates each of them in turn, right up to the last board of directors meeting, where he is fired. You'll meet Michael Price, whose mutual funds owned a large piece of Sunbeam and to whom Dunlap ultimately owed his job. Also present is Ron Perelman, the billionaire financier and chairman of Revlon, whose sale of camping equipment maker Coleman Co. to Dunlap eventually helped lead to Dunlap's fall from grace. Chainsaw, finally, is about the mad pursuit of wealth in the last decade of the century. Loaded with implications for everyone with a stake in American business, Chainsaw will be to the 1990s what Barbarians at the Gate was to the 1980s.

Genres: Business, Biography, Nonfiction, Economics, Psychology

416 pages, Hardcover

First published January 1, 1999

About the author

John A. Byrne is an American journalist, author and the CEO of C-Change Media Inc. Byrne is known as the editor-in-chief first at Fast Company Magazine and then businessweek.com, he was also the executive editor of Business Week magazine.

Reviews

[Robert W · Rating 3 out of 5]

The summer reading continues with another quickie, Chainsaw by John A. Byrne. Not really a biography of “Chainsaw” Al Dunlap, it only covers his Waterloo—Sunbeam. Sunbeam, which eventually declared bankruptcy after Dunlap finished with it, in one of the notorious accounting scandals of recent times. Financial Shenanigans fell back to Sunbeam for examples of financial chicanery many times—they were guilty of nearly every trick in the book. The particular thing that brought Dunlap down seems almost quaint to describe—recording revenue early and/or recording revenue of dubious quality. What this meant was that Sunbeam “sold” its customers (big retail chains) months worth of inventory, warehoused it for the customers, and gave them absurdly liberal payment and return options. This allowed the company to book sales months (and even a year) before they could ever hope to actually get paid—if they got paid. The retailers could “return” the unsold merchandise (which would mean just transferring ownership, since they hadn’t taken possession of the merchandise in the first place).

Dunlap’s reputation was as a cost cutter who would come into a company, close down most of the factories, and fire most of the workers. Wall Street routinely applauded this type of behavior in the 80s and 90s, and still does to an extent. The idea was that these slash-and-burn executives were creating shareholder value. Just announcing that Dunlap had been hired pushed Sunbeam stock way up.

But Dunlap was a fraud. His modus was to create a company that looked good to Wall Street so that he could sell it and make a fortune. Whether the company was actually good—whether its present value was increased—was immaterial to Dunlap, who was a heartless, soulless, hateful, greedy, abusive, thuggish conman.

The idea of “shareholder value” was a backlash against imperial, conglomerate-building CEOs, and it was probably a necessary corrective. But wasn’t it obvious that if Wall Street suddenly started demanding short-term profit in the name of shareholder value, that locusts like Dunlap would “create” it for them? In fact, there are always two groups of shareholders; those who currently own the stock (or options), and those who will own it in the future. Dunlap’s scheme was to steal from the future owners and reward the present owners (especially himself).

Analysts and investors that rewarded Dunlap for every announcement of layoffs deserve scorn. The book makes clear that many plant-closings had negative NPVs. When one of Dunlap’s executives tried to point this out to him, he was snarled at by Dunlap. Dunlap didn’t care if actual value was destroyed—he only cared what the perception on the Street was. And, irrationally, the Street rewarded him.

Of course, he got his comeuppance. Still, he avoided the jail sentence that he so richly deserved.

Chainsaw is an excellent book, and one that is good to read with more technical books like Financial Shenanigans and Infectious Greed.

[Kyler · Rating 4 out of 5]

An insight into what happens when people with no conscience get into a position of power. Chainsaw Al thought he could cut his way to prosperity and found out that there are repercussions to his slash and burn tactics. Unfortunately there are still companies today that have not realized this.

[Jeff Platsky · Rating 5 out of 5]

The ultimate tale of CEO, corporate hubris told by a respected business reporter. This is a must read for investors who want to learn about how the plumbing of business - accounting- can go haywire under the direction of a CEO who puts short term gains over the long term health of a company.

[Jon · Rating 4 out of 5]

Great read. Humbling how much someone in a position of corporate power can unduly destroy the lives of tens of thousands of people.
The author did a great job of investigative journalism, very thorogh. I would definitely read more by this author.

[Dave · Rating 4 out of 5]

A great read on how you can destroy a business with accounting tricks, cruel behavior, and backwards incentives.

[Randall · Rating 5 out of 5]

the dude was a total ass.

[David]

from motley fool