COVER STORY PODCAST
When it comes to Larry Ellison, Terry Garnett does not mince words. "I do hold grudges," Garnett says. "Am I motivated by that? Absolutely." A former Oracle Corp. (ORCL) senior vice-president, Garnett spent the early 1990s traveling around the world with Ellison, Oracle's CEO. They hobnobbed with the likes of media moguls David Geffen and Barry Diller as the company tried to become a player in the interactive-TV business. Garnett and the software billionaire were so tight that Ellison even invited him and his wife to go along on a vacation to Kyoto in 1994. That year marked the 1,200th anniversary of the founding of Japan's former imperial capital, a meaningful occasion for Ellison, a passionate Japanophile. Together, he, Garnett, and four others made the pilgrimage along the cherry-blossom-lined Philosopher's Walk to the famed Ginkakuji Temple.
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But what came next led to the bad blood that Garnett still tastes more than 12 years later. Within weeks of their return from Japan, Ellison summoned Garnett to his office. He scrapped the interactive-TV startup the two were planning and, Garnett claims, fired him without giving a clear reason. "It was pretty clinical," he recalls. "I tried to keep composed."
Feeling numb, Garnett returned to his office, not more than 30 feet away, and packed up. Afterward, he spent weeks trying to understand why he had been fired. Garnett later sued Ellison, accusing him of unfairly firing him, but then he dropped the claims. (Oracle officials declined to comment, but their reply to Garnett's suit cites his "declining productivity.") Brimming with anger, Garnett made a vow to himself: "There will be a day of reckoning." Today he is acting CEO of Ingres Corp., a software upstart that's gunning to grab market share from Oracle.
Ask CEOs what drives them, and they'll talk about success, personal fulfillment—a few will even admit to be driven by the desire for money and power. But Garnett's professed appetite for payback is a motivation rarely leaked from executives' on-message lips. "It's one of the great undiscussables," says Kenneth N. Siegel, a Los Angeles psychologist and coach to senior executives. "Just as you don't talk about lust in the executive suite, you don't talk about revenge as a significant motivator for success. But it clearly is."
In our euphemism-laden, numbers-driven, "it's just business" corporate environment, it's easy to forget that the desire to get even is one of those primal human impulses that lurks behind executive behavior. Revenge is at least as old as the Bible ("Vengeance is mine," saith the Lord) and provided a plot line for many a Shakespearean tragedy, but it's also written into the script of many of the most memorable corporate dramas. And in today's hypercompetitive business world, as the spiraling rate of executive turnover leaves behind a trail of ousted managers and as leaders marred by recent corporate scandals try to restore their reputations, it's a subtext of many of the most dramatic recent business stories, too.
Exhibit A: The Hewlett-Packard Co. (HPQ) leak investigation. Yes, maverick board member and wealthy venture capitalist Tom Perkins did the world a service in alerting government officials to the unsavory tactics being used by investigators hired by HP. But there's another way to look at this whole sordid saga.
Perkins, who would resign from the board, and Patricia C. Dunn, then its chairman, were embroiled in a bitter feud over board procedures. After the results of the leak probe, which fingered Perkins' good friend, George A. "Jay" Keyworth II, were presented at a board meeting in May, Perkins accused Dunn of betraying him, violating an agreement they'd made to handle the leaker's identity "offline." (According to Dunn, there was no such arrangement.) He claimed that the reputation of "a good man"—his buddy Keyworth—was being "ruined," Dunn has said. After she stepped down as chairman in September, Perkins seemed to relish the moment. "My No. 1 thing was to get Pattie [Dunn] out as chairman, and I got that," he told Newsweek. "So I'm happy." Perkins, one might say, had gotten his revenge. (A rep for Perkins says he "acted solely in the best interests of HP, its shareholders and employees.")
The HP tale isn't last year's only payback-tinged business drama. Kenneth G. Langone, the fiery billionaire co-founder of Home Depot Inc. (HD) and onetime head of the compensation committee of the New York Stock Exchange's (NYX) board, was named in a lawsuit by former New York Attorney General Eliot Spitzer over his role in ex-Big Board Chairman Richard Grasso's giant $187.5 million pay package. In early 2006, during Spitzer's campaign for the Democratic gubernatorial nomination, Langone and members of his family gave $64,000 to Spitzer's long-odds opponent, Tom Suozzi. He also urged friends and associates to donate money. (In an e-mail, Langone said: "I thought it was time to stand up to [Spitzer] and demand accountability. It wasn't revenge, it was principle." His spokesperson says the funding was based "on the merits" of Suozzi's candidacy.)
And following the government's indictments in May of class action law firm Milberg Weiss Bershad & Schulman for alleged illegal kickbacks to plaintiffs, some in Silicon Valley are savoring the twist of fate. While William Lerach, who aggressively sued technology companies in the 1990s and left the firm in 2004, has not been named in the indictment, some executives still relish his former firm's misfortune. "We're all enjoying it because he's a parasite," says T.J. Rodgers, CEO of Cypress Semiconductor Corp. in San Jose. "It's just poetic justice."
Rodgers' glee has a name, of course: schadenfreude, or joy at others' woes. It's a close cousin to the desire for revenge. The satisfaction we receive from the punishment of others is not only something we can all identify with, but something to which we're all neurologically inclined.
Ernst Fehr, a behavioral economist at the University of Zurich, studies how our brains react when "social norms" are violated. In Fehr's research, two players are asked to exchange money according to various scenarios. When one player hoards the cash for himself, the other has an opportunity to punish him financially. The player who got burned is hooked up to a brain scan while he's considering whether to retaliate. Fehr found that the part of our brains associated with feeling satisfaction was more strongly activated while players contemplated getting even. "There is a hedonic force behind the punishment," says Fehr. Put simply: Revenge is biologically, scientifically sweet.
There's something delicious about getting back at someone who has hurt us. Or doing well as that person looks on. Savoring the balm of revenge does not require active stabs at retribution; it can also be a byproduct of success. "We hold the illusion that if the other person is as venomous as we think, [even] their knowledge of our success is psychologically damaging to them," says Jeffrey A. Sonnenfeld, senior associate dean at the Yale School of Management.
Spurned CEOs can experience this form of pleasure by turning around a struggling competitor. Consider Millard "Mickey" Drexler, the "merchant prince," as he has been called for his pitch-perfect retailing skills, who was pushed out of Gap Inc. (GPS) in 2002 after 19 years at the helm. Unlike most other CEOs, who walk out the door with millions in severance, Drexler left behind a hefty package and its noncompete restrictions.
That decision allowed him to bag a job leading preppy retailer J. Crew Inc. (JCG), which he helped private equity firm Texas Pacific Group take public in June. Since joining J. Crew, Drexler, 62, has hired at least two dozen executives away from his former employer. He has also launched a new brand called Madewell that, with prices below J. Crew's, could compete with Gap. Madewell's two stores, which opened in August, carry hip, high-quality jeans, sweaters, and accessories. Sound familiar? (One J. Crew representative says Madewell is not intended as a Gap competitor.)
Drexler has insisted he is not motivated by revenge, but he has also said that anger over his departure "helps fuel my accomplishment now." Even if payback isn't an active pursuit, he's probably savoring the redemption. J. Crew's initial public offering was one of the most successful in 2006. In its most recent quarter, operating income increased 51% from the year before. Meanwhile, his successor at Gap, Paul Pressler, is experiencing steady drops in sales and may be exploring a sale of the company. "[Drexler's] parting at Gap now in retrospect is probably deeply regretted," Evan S. Dobelle, a former Gap board member and now president of the New England Board of Higher Education, said in an e-mail. Drexler declined to comment to BusinessWeek.
Revenge is a response to a perceived injustice or what psychologists call narcissistic injury, known to you and me as a wounded ego. This reaction is often acute in entrepreneurs or members of family businesses, whose sense of self-worth is bound to their businesses. "For a founder whose identity is wrapped up in his company, there's no end to the revenge that one could want to exact on those who threaten to take it away," says Kenneth Eisold, a New York psychoanalyst who counsels business executives.
In the case of an executive whose throne isn't just threatened, but taken away, nothing may be more fulfilling than being able to reclaim it. Steve Jobs, who was forced out of Apple Computer Inc. (AAPL) in 1985 only to return in 1997, isn't the only one who has achieved this unlikely feat. Take Malcolm Walker, a British entrepreneur who founded Iceland, a grocery chain specializing in frozen foods that's now among Britain's largest private companies. Back in December, 2000, when Iceland was still a public company and Walker was looking forward to his pending retirement, he controversially sold $19.8 million of his equity stake just weeks before his successor, Bill Grimsey, who took over on Jan. 2, 2001, issued a profit warning amid slumping sales. Shares went into a free fall.
It quickly became clear Walker had to resign immediately. Britain's Department of Trade & Industry (DTI), a government agency, launched a probe into the stock sale. "When I left, I was no longer the guy who had built a successful business," he says now. "I was remembered as the dodgy guy who was being investigated for insider dealing." Later, Walker recalled: "I had a tremendous cloud hanging over me." Despite the dark days, Walker didn't waste time before firing back. Within months, he opened a rival shop, which he joked would be called "Frozen Out." (What was that again about retirement?) The store was actually named Cooltrader, and before long, Walker expanded to 20 outlets. Trapped on the sidelines of Iceland, he plotted his return. "I had something to prove," says Walker, who was later cleared of any wrongdoing.
In late 2004, Walker joined up with retail investment firm Baugur Group to buy back the grocery chain and, on Feb. 11, 2005, his birthday, returned to run his company. While he has busied himself with retrofitting stores and simplifying inventories, he has also been settling a few old scores. He renamed the years he was away the "Dark Ages" on Iceland's Web site, where he has cobbled together a list of Grimsey's turnaround forecasts in the press, mocking the oft-promised recovery. ("It's my Web site, isn't it?") He has sent a dossier of his own to the DTI, questioning Iceland's finances during his absence. (Grimsey told BusinessWeek: "I take no notice of Malcolm Walker. I've moved on with my life.") Today, according to Walker, Iceland's sales are growing again at double-digit rates. "Everything I'm telling you now enables me to feel totally vindicated."
High-profile departures or firings are hardly the only circumstances that can spur people to want to get even. From vendettas against co-workers who shoot down ideas to grudge matches between middle managers vying for a senior job, payback plays a role in the more mundane scenarios in corporate life, too.
Indeed, in business, revenge often takes on passive forms. "You rarely see someone with a knife in their back" in a business context, says Richard Olivier, an Englishman who runs workshops that use Shakespeare's plays to help leaders unravel motivations such as revenge, ambition, and power. Rather, "you see lots of people who are dying the death of a thousand small cuts," says Olivier, the son of actor Laurence Olivier.
Yet another business scenario that incites its share of retribution is the passed-over executive. "It's not as visible," says Yale's Sonnenfeld, "but there's a seething sense of resentment in people who've spent a lifetime thinking they've earned something only to have it snatched away at the 11th hour." Consider Joseph Galli Jr., who in 1999 was president of the power tools and accessories group at Black & Decker Corp (BDK). At 41, he was pushing his boss, CEO Nolan D. Archibald, who had been in the job for 15 years, to step down and give him his moment in the sun. When Archibald resisted, a frustrated Galli quit.
Those who know Galli say he is still driven by not getting the top job. His fondness for the tool business never waned, either: In his brief, one-year term as COO of Amazon.com Inc. (AMZN), he introduced tool sales to the online retailer before other categories, such as toys and office products, that most analysts said made more sense. And in 2001 he joined Newell Rubbermaid (NWL), drawn by the offer to be CEO and the chance to expand Newell's tool line into a force that could eventually challenge Black & Decker's market share. That never happened: In late 2005, after four years of unmet earnings targets, Galli resigned.
His newest post, as chief of Techtronic Industries Co.'s global floor-care division, appears to be a stepping-stone to running the entire Hong-Kong-based company, which includes tool brands such as Ryobi. Galli, a fiercely competitive former college wrestler, is widely expected to be named CEO of Techtronic when his noncompete clause in the tool category ends in late 2007. "He is utterly driven by the thought of passing Black & Decker, so much so that he took a divisional job after being CEO of a whole company in order to line up the stars," says one former Techtronic executive. Galli, still bound by his noncompete, says he can't comment on the tool business.
Noncompete or nonsolicit arrangements, designed to prevent people from hiring former colleagues, can stand in the way of executives turning their revenge fantasies into reality. They may be barred from battling their former companies if they want severance pay. Still, recruiters say they often see spurned execs try to get around such agreements by using a headhunter, who would first conduct an exhaustive search, as a shield. Mark Jaffe, a Minneapolis search consultant, says clients can be pretty explicit with him, both when responding to rivals' poachings or when, as departed executives who become newly employed, they try to exact damage upon the company they've left behind. "This is not typically something that's very veiled [to the recruiter]," he says.
Indeed, says Brian M. Sullivan, CEO of New York search firm Christian & Timbers, some companies have offered premiums for recruiting people from a competitor that has stolen one of their own. "They'll put a bounty on them," he says. And when the poaching is personal, watch out. Jaffe says he recently got a request from the division president of a major company. She had just had one of her top people stolen away by a friend who worked at a rival. In filling the now vacant job, Jaffe says, she urged him to focus heavily on the competitor. "Let's see how much damage we can do in filling that position," she told Jaffe, who nonetheless didn't find anyone at the firm.
Which brings us back to Garnett. Since getting sacked by Ellison, he has channeled his anger into investing in and building up companies that compete head-to-head with Oracle or Ellison projects. The most recent of these is Ingres, a low-cost, open-source software startup that Garnett hopes will poke a hole in Oracle's high-price database business. Garnett has targeted Ellison's team for several engineers and managers. He has also hired a small army of former Oracle folks to help him torpedo the old mother ship: Of Ingres' 250-member staff, 50 are ex-Oracle, including several top executives and key technologists. Many directors have the Oracle pedigree, too. "The simplest way to create a culture is to pick an enemy," says Garnett. "We have an enemy: It's Oracle."
By Jena McGregor, with Steve Hamm in New York and David Kiley in Detroit