Many star athletes know when to quit. Others just don't know when to hang up their shoes until they've been beaten to a pulp and have to crawl away. So it goes in the corporate world where only a firmly planted boot would get some CEOs out of the corner office. One such event is playing out in the contract-manufacturing world.
More than 16 years after assuming the position of chairman and CEO, Jure Sola of Sanmina-SCI Corp. is holding tightly to his job despite a litany of problems, including poor performance on the equity market, five years of net losses, negative revenue growth, weak margins, a series of so far unremarkable turnaround and restructuring efforts and Securities and Exchange Commission investigations into allegations of improper backdating of stock options granted between 1997 and 2006 under his watch.
Sola has led Sanmina-SCI as CEO and overseen the company's expansion into one of the industry's leading electronics manufacturing services providers since 1991. He co-founded the company in 1980 and has served in several capacities in sales and marketing and manufacturing before assuming the CEO position.
Sola's contributions to the company's growth are not in doubt. In fact, he and the founding executive team at Sanmina-SCI helped pioneer the EMS sector, which is today one of the main pillars of manufacturing and supply chain services in the industry. The latest problems at the company, however, are the symptoms of a management disease we'll describe here as executive fatigue.
Certainly, Sanmina-SCI's current stockholders can't be thrilled with its stock price, which has fallen 27 percent in the last one year and 78 percent in less than three years.
The company is party to numerous lawsuits alleging management failed to perform their fiduciary duties to shareholders because the stock options granted starting in January 1997 and through sometime in 2006 were not properly dated. On June 29, the company's stock will be removed from the Standard & Poor's 500 Index, forcing some funds to sell its shares.
Moreover, the company is again undergoing another round of reorganization, facility closures and cost-trimmings to reposition itself for growth in the intensely competitive EMS market. After 16 years at the helm, is it possible Sola might no longer be the right person to lead a company locked in a battle for its own survival? That might well be the case.
Even if only a couple of rogue employees were completely to blame for the stock option problem as the special committee set up by Sanmina-SCI's board of directors claimed, the events still occurred under the watch of the current management, which, in addition to the failure to provide proper oversight, has failed to pull the company out of its slump.
The company requires a new CEO with a different vision for Sanmina-SCI's future. The market in which Sanmina-SCI plays today is not the one Sola started out leading in April 1991. It is time for a new leader to take the helm