5 Famous Founders Ousted by Their Boards

5 Famous Founders Ousted by Their Boards

It’s a tough time to be a founder. Entrepreneurs who have been greatly rewarded by taking risks and following their gut are often rewarded with pink slips when things go sour. Social media rants and viral videos are now enough to send company leaders packing from the companies they worked so hard to create. Corporate governance relies on influence and reputation, especially at public companies. A negative public perception of the company’s leader can have very real financial implications. One bad quarter or a public relations blunder can send shareholders on a head hunt for responsible parties, and many times the buck stops where it began in the first place. Here’s a look at the current crop of news stories along with a few other famous founders who found themselves tossed overboard.

Ousted: Dov Charney

The Firm: American Apparel

In 1997, Canadian Dov Charney opened his T-shirt company in Los Angeles around his fascination with all things American.

Milestones: A decade after its modest beginnings, American Apparel was on Inc. Magazine’s list of the fastest growing companies in the country with revenues topping $127 million. It became the center of a “Made in the U.S.A.” lobby, protesting sweatshop conditions in developing countries.

What Went Wrong: As far back as 2004, many sexual harassment lawsuits and stories of misconduct by Charney circulated in the press. A store manager reported that Charney judged photos of employees during company meetings, demanding certain people be fired if they were not attractive enough and calling it “tightening the AA aesthetic.” Over the past few years, American Apparel has lost over $270 million and approached bankruptcy.

Results: This summer, Charney was fired by the board for reasons related to financial and personal misconduct. Charney is fighting the ouster on the basis that no new sexual harassment lawsuits have been filed since his contract was renewed in 2012. Standard General has begun buying up millions of dollars in stocks and selling them to Charney, who now owns a 43 percent stake in the company (with conditions). The power struggle remains very public and closely watched.

Ousted: Chip Wilson

The Firm: lululemon

On the beach in Vancouver, B.C., Chip Wilson created lululemon after an inspiring yoga class, in 1998. The company has cornered the market on “athleisure” wear with stores intended to serve as community hubs for healthy living.

Milestones: The high-end yoga-friendly wear established itself as a status symbol. Its cache allowed it to book $1,800 in sales per square foot, putting it far ahead of embattled retailers like Neiman Marcus. Several years of sustained sales growth at 30 percent or more turned lululemon into a business valued at $10 billion by 2012. Amid a public Luon yoga pants recall and dropping sales, it began to expand into new ventures in 2013.

What Went Wrong: Wilson has made some wildly inappropriate and offensive comments, including statements in favor of child labor. He told the National Post Business Magazine that he chose the company’s nonsensical name specifically to thwart pronunciation by Japanese speakers, commenting, “It’s funny to watch them try to say it.” When consumers complained that the company’s Luon yoga pants were see-through, Wilson responded, “Frankly, some women’s bodies just don’t actually work [for yoga pants].” In December of 2013, Wilson stepped down as non-executive chairman, but remains on lululemon’s board of directors.

Results: Recent news has focused on a power struggle on the board, with Wilson very publicly voting against two fellow board members who were elected against his objections.

Ousted: Martin Eberhard

The Firm: Tesla Motors

The electric-powered sports car company is now synonymous with Elon Musk’s future-forward ventures, but it actually was launched by Eberhard and Marc Tarpenning in 2003. Musk was one of the early investors.

Milestones: Eberhard was the prototypical founder with great ideas and energy but very limited CEO experience. His exuberance only took him as far as Tesla’s first working model.

What Went Wrong: In 2006, Eberhard explained in his company blog why Tesla’s first car, the Lotus, came in late and over budget. The next year, he was removed.

Results: Despite signing a non-disparagement agreement, Eberhard posted on the company’s forum, “I am not at all happy with the way I was treated, and I do not think this was the very best way to handle a transition—not the best for Tesla Motors, not the best for Tesla’s customers (to whom I still feel a strong sense of responsibility), and not for Tesla’s investors.” Tesla is now valued at $27 billion with a plan to sell half a million electric cars per year by 2020. Eberhard is working with BRD Motorcycles on electric racing bikes.

Ousted: Noah Glass

The Firm: Twitter

Twitter may define the world of social media now, but it didn’t seem revolutionary in 2006 when Noah Glass started converting texts into hosted MP3s with a software called Odeo. Google alum Evan Williams backed it, then brought in Jack Dorsey and Biz Stone. Glass named their new project “twttr.”

Milestones: Glass picked Dorsey as a rising star at Odeo. Glass said, “[Dorsey] started talking to me about this idea of status and how he was really interested in status. I was trying to figure out what it was he found compelling about it.” Glass put together a team and made Twitter real on his own ThinkPad. After an earthquake in San Francisco in 2006, Odeo’s employees immediately jumped onto Twitter. By the fall, user count was in the thousands and growing wildly.

What Went Wrong: Evan Williams downplayed Twitter’s value and bought back all shares from all the other Odeo investors. Some say he was trying to help them, but many others see that as an underhanded way to take control of a something that he could see would become extremely valuable. When he had amassed a controlling stake in Odeo, Williams fired Glass. It may have been a personality struggle or a personality clash but in the end, Glass disappeared.

Results: Glass recently told Business Insider, “I felt betrayed by my friends, by my company, by these people around me I trusted and that I had worked hard to create something with. I was a little shell-shocked. I was like, ‘Wait…what’s the value in building these relationships if this is the result?’ So I spent a lot of time by myself. And working on things alone.”

Ousted: Steve Jobs

The Firm: Apple Computer

This is the example every founder turns to when the going gets rough because of its storybook ending. Steve Jobs and Steve Wozniak essentially invented the personal computer when they launched Apple Computers in 1976. Their home base in Cupertino, California, became the seed that started today’s Silicon Valley.

Milestones: Steve Jobs built the DIY computer kit-maker into an international powerhouse with the introduction of the Macintosh, the first computer that average people could actually use.

What Went Wrong: Jobs erratically pursued his dream that computers should be as easy to use as refrigerators. Amidst disappointing sales and marketing failures, then-CEO John Scully gathered board members on his side for a power play that forced Jobs to resign just one year after the Mac’s debut. In his famous speech at Stanford, Jobs asked, “How can you get fired from a company you started?” He concluded, “Getting fired from Apple was the best thing that could have ever happened to me.”

Results: Jobs bought and built Pixar, which revolutionized the world of film animation. At the same time, he founded NeXT computers and software, which was acquired by Apple in 1997. Jobs was tapped to be Apple’s interim CEO, which prompted him to joke that he had become the new iCEO. Jobs resigned in August of 2011 and died two months later, hailed as Apple’s creative muse.

Moving On

Getting fired always hurts, especially when you hired the ones who fired you. At the C-level, careers tend to be binary— you are in, or you are out. Personal failings and political wrangling that happen at every level tend to become big news stories for founders. The winners don’t always come back, but they do tend to shake it off and move on to something new.