Doesn't Anyone Want to Run a Dot-Com?

As execs bail out, top jobs are going begging

As if things weren't tough enough for dot-coms grappling with a reeling economy, lousy business models, and sinking stock prices. Now even the best among them have one more headache: an increasingly bleak outlook for executive recruiting.

For the first time, even solid Internet companies are struggling to fill their top-level executive vacancies. Suddenly saddled with the departure of its CEO Timothy Koogle, Internet blue chip Yahoo! Inc. (YHOO ) has already been hunting for a new sales chief for about half a year, according to industry sources. Online broker Ameritrade Holding Corp. (AMTD ) missed a self-imposed December deadline to fill its seven-month-old CEO vacancy, finally hiring Merrill Lynch & Co. Senior Vice-President Joseph H. Moglia on Mar. 5. Covisint, an online exchange for the auto industry, has had an empty CEO seat for the past 13 months. Other sites, such as search engine AltaVista Co. and bookseller (BNBN ), have also been stymied. Their CEO posts have been vacant for four and 13 months, respectively. "This is in stark contrast to just a year ago." says John T. Thompson, head of the CEO practice at recruiting firm Heidrick & Struggles International Inc.

NO GUARANTEES. Making the situation dicier, the number of vacancies is going up. Internet portals Yahoo! and Terra Lycos, for instance, have lost seven top executives between them since the start of February, including Yahoo's top honchos in Europe and Asia. Despite the array of explanations, ranging from family reasons to other job opportunities, one thing is certain: Net companies have gone from changing the world to fighting for survival--a bitter pill for many current and potential execs to swallow. Moreover, the number of e-commerce CEO departures has numbered nearly one per day, with 26 such execs exiting their jobs in January alone, according to outplacement firm Challenger, Gray & Christmas Inc.

What gives? It's a simple matter of risk vs. reward. Once, compensation packages heavy on stock options could lure traditional execs with the promise of quick riches. Today, with Net stocks out of favor, some candidates doubt the stocks will rise enough to make a risky move worth their while. "Options don't mean anything," says one media executive who turned down an offer of $1 million-plus in salary and stock options to head Yahoo's sales division. "Yahoo's an A-class Internet company, but the offer didn't outweigh the risks."

Equally important, candidates want to be sure an Internet company's slide has bottomed out before considering a move. The idea: to avoid a situation where a company's decline has so much momentum that it doesn't matter what decisions management makes.

That's a lesson newbie dot-com executives have had to learn the hard way of late. George T. Shaheen, the former CEO of Andersen Consulting, for instance, took the top job at online grocer WebVan Group Inc. (WBVN ) in September, 1999, only to see its stock plunge 99% from its all-time high, to 33 cents. Similarly, Joseph Galli Jr., the former CEO of online marketplace VerticalNet, left his position in January, after a mere six months, to join housewares maker Newell Rubbermaid Inc. During Galli's brief tenure, the Internet company's stock tanked 93%, to $3.91. "Executives want to know that if they make the right decisions and hire the right people, they can succeed," says Bob Lambert, managing director of recruiter Christian & Timbers. "In this market, you just can't guarantee that."

TRUE BELIEVERS. None of this bodes well for Internet companies, many of which are in sore need of experienced management talent. "A bad leadership fit is the single most important reason [Internet companies] are failing," asserts one high-tech venture capitalist.

To be sure, not all brick-and-mortar execs are shunning Internet jobs. On Feb. 28, former Compaq Computer Corp. Vice-President Ray Villareal took the helm at Internet startup Corp., an information site. He even took a package that was heavy on equity. "I believe in the business, so why not?" says the 41-year-old Villareal, who insists the Internet sector still has much appeal to traditional execs. "There's always going to be pull to go to a fast-moving environment." It's a leap of faith, however, that many execs are no longer willing to make.

By Ben Elgin in San Mateo, Calif.

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