Waste Management Inc. was in the dumpster.
In early 1998, the largest trash hauler in the United States announced that it had overstated its 1992 to 1996 earnings by US$1.4 billion. That boo-boo forced the company to subtract US$1.1 billion from its ledgers and restate its earnings back to 1991.
After announcing its error, Waste Management was bought by USA Waste for US$26.6 billion in equity and debt, and moved from Oak Brook, Ill., to Houston. Long-suffering Waste Management shareholders were promised that the new, bigger corporate entity would save US$800 million through economies of scale, and the new company proceeded to chase those economies by acquiring garbage operations, throughout 1999 at a rate of one a day. The total eventually reached more than 1,500. But in July 1999, Waste Management delivered the first of several earnings disappointments, falling short of revenue projections by US$250 million for the second quarter. Upon issuing the earnings warning, the stock plummeted 37 percent on July 7, 1999. Waste eventually lost more than US$20 billion in shareholder value, represented by the difference between its May 3, 1999, stock price of US$58 (just after its acquisition by USA Waste) and its US$14 low on Dec. 20, 1999.
Then the U.S. Securities and Exchange Commission (SEC) launched an inquiry into the circumstances that allowed 13 insiders to dump more than a million shares of Waste Management stock two months before the July 7 price drop. A truckload of shareholder lawsuits followed, which Waste Management eventually settled for US$220 million.
In August 1999, the company's fifth CEO in three years, John Drury, was diagnosed with brain cancer and stepped down. The board then ousted President and COO Rod Proto. Turnaround expert Robert Miller, former SEC Chairman Robert Hills and shareholder activist Ralph V. Whitworth, all on Waste's board, took the wheel and did just what Yellow Corp. and America West Airlines -- both companies that had teetered on the edge of the abyss -- had done before.
They called A. Maurice "Maury" Myers.
Whitworth wanted a CEO with solid turnaround experience, an understanding of asset-rich companies and a knowledge of IT systems. That was Myers. Whitworth had watched him bring Kansas City, Kan.-based Yellow Corp. which had lost US$61 million between 1993 and 1996 back into the black and in just three years turn the 76-year-old trucking company into a high-tech leader.
A little negotiating, an US$850,000 salary and a bonus that would amount to more than US$1 million by the end of 2000 brought Myers aboard in November 1999.
"I don't show up until things can't get any worse," the soft-spoken 61-year-old says with a chuckle.
And he doesn't show up without Tom Smith. Before accepting the garbage gig, Myers called Smith, then president of Yellow Technologies, the subsidiary that provides IT support across Yellow Corp.
"He said, 'I'm leaving, and I'd like you to go with me,'" Smith recalls. "And I said, 'Fine. Where are we going?'" Myers explained the situation at Waste Management. "At that point, I decided I'd better call my wife and tell her to think about moving," adds the white-haired, 62-year-old Smith, who had just sold his home and was on the verge of closing on another. He was thinking about golfing and traveling. Instead, he rerouted the moving trucks to Houston and arrived there two weeks after Myers in November 1999.
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