When things are not what they appear to be

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Henchmen and Satan Followers

Things are not always as they seem; the first appearance deceives many.
— Phaedrus

From movies, I have learned that the problem with joining a bunch of followers of Satan in chalking out a Pentagon and engaging in a complicated chant to summon some kind of demon is that, immediately upon arrival, said demon will tear the chanters apart.

Call it bad temper, jetlag, or a bad hangover… it really doesn’t matter what the cause is, the outcome is assured.

7985821930_24e0a58f88_oHenchmen have a similar problem. For reasons that I have never quite understood, henchmen who deliver bad news are always knocked off by the crime-boss in a psychotic rage. And, if you are a henchman that is successful in your mission and, therefore, your capo does not kill you in a psychopathic rage, he or she will kill you with a sociopath’s detachment after having calculated that you may — or may not — become the subject of a grand jury indictment or some similar arrangement.

Failure or success, you lose. Again, it really doesn’t matter what the cause is, the outcome is assured.

For both Satan followers and henchmen, clearly, once you have done what needs to be done, you have outlived your usefulness and are subject to immediate termination with extreme prejudice.

Moreover, even if you did precisely what was asked of you, provided your boss with a valuable services, and survived the first pass of the scythe, you may have planted the seed to your own destruction because of the laws of lingering embarrassment, whereby your presence serves as a daily reminder to your boss of his or her failings, which necessitated your actions in the first place. In this scenario, in fact, the better you did the job, the more of an embarrassment you are, and, by neccesity, the more painful and swift your eventual execution is likely to be.

So why be a Satan follower or a henchman? What in the world would make you think that you are different than the legions of henchmen and Satan followers that have gone before you?

Hannan Carmeli and Israel Borovich

I was reminded of these questions when ClickSoftware Technologies today announced that Mr. Hannan Carmeli, the company’s co-CEO and a 17 year veteran with the company, had resigned his position and would be leaving the company.

ClickSoftware Technologies, an Israel based enterprise software company that I have written quite a lot about (for a baseline discussion, go here,) is a market leader in the supply of scheduling software for enterprises.

I recently wrote about ClickSoftware in connection with the company’s annual proxy-voting, which provided the common shareholders with several measures enabling a change of the degree of control exercised by Dr. Moshe BenBassat, the company’s founder and, at the time before the proxy voting, the company’s CEO and Chairperson of the Board of Directors.

One of these measures was a split of the CEO and Chairperson of the Board of Directors roles, which perhaps more than anything else could be viewed as a vote of confidence or non-confidence in Dr. BenBassat’s recent leadership of the company as well as a vote about succession planning and control.

In what appeared to me to be a masterful preemptive strike, Dr. BenBassat circumvented the sting of this, potentially humiliating vote, by, immediately prior to the proxy voting, assigning a co-CEO with immediate effect (read more about this here.)

Ultimately, and not surprisingly given an extremely high requirement for affirmative votes (a very unusual requirement in the white-wash world of proxy voting) and a fair number of disgruntled shareholders (read more about this here,) Dr. BenBassat did lose his bid for keeping the joint CEO and Chairperson role, and a new Chairperson of the Board of Directors was named (read more about this here.)

Although it may, therefore, on the surface seem like Dr. BenBassat failed in his effort to steer the proxy voting in his favor this was far from the case. In fact, by establishing the co-CEO role before the proxy vote he, as they say, got out in front of the story, positioning the inevitable loss of control of the dual CEO/Chairperson role as a planned, deliberate, and magnanimous move. And, more importantly, he deflected the defeat of other key voting measures, including compensation measures, which, he, himself, directly and significantly benefitted from, such as option grants solely designed to prevent dilution of his ownership position from an ongoing, yearly process of diluting the common shareholder that he, himself, had presided over for years. Niccolò di Bernardo dei Machiavelli would have been proud of his prince.

The named co-CEO, Mr. Hannan Carmeli, a 17 year veteran with the company, may have been very excited about this promotion and may, I guess, for a very brief moment, have thought that his position as heir apparent was secure, but, in fact, he was not about to enter into the hallowed halls of executive leadership, but, rather, about to learn the age-old lesson of the mortality of henchmen.

Like Mr. Cameli, the new Chairperson of the Board, Dr. Israel Borovich, may have felt that his new position was one of importance, but certainly, in the days after the proxy voting, it looked to the outside world that he was in for a bit of a surprise.

The first hint of the potential irrelevance of the new co-CEO role and the new Chairperson of the Board of Directors came to light in the company’s first quarterly earnings call after the proxy voting. As I wrote in an earlier posting:

On July 23rd, 2013, ClickSoftware Technologies announced the appointment of Dr. Israel Borovich as non-executive Chairperson of the company’s Board of Directors, ending speculation, I guess, about whether or not Dr. BenBassat would resign his co-CEO position and assume the role of Chairperson.

That Dr. BenBassat has chosen to — in principle — be under the oversight of the Board of Directors, tells us a lot about Dr. BenBassat’s view of the Board of Directors and his future plans for the company and himself.

And if there were any doubts about who is in change after the splitting of the CEO position into two co-CEO positions and the splitting of the CEO and Chairperson of the Board of Directors position, such doubts were eradicated when the company conducted its second quarter earnings conference call on July 24th, 2013, where only Dr. BenBassat and the company’s CFO attended, while the new co-CEO, who should certainly have been on the call, and the new Chairperson of the Board of Directors who ought to have been on the call, were absent.

For me this conference call on July 24th, 2013, dealing with a spectacularly disappointing quarter, cemented the impotency of Mr. Borovich (although, as we will see below, I may have been too early on that one) and sealed the fate of Mr. Cameli, effectively wounding Mr. Cameli severely, leaving him incapacitated on the battlefield, awaiting the coup de grâce.

An additional hint of the potential irrelevance of the Mr. Carmeli’s role as co-CEO role was, of course, the absence of an announcement that he would join his co-CEO as a Board of Directors member.

By the way, just in case that you are confused by the term “resignation,” here is the full text of today’s announcement:

ClickSoftware Technologies Ltd. (CKSW), the leading provider of automated mobile workforce management and optimization solutions for the service industry, today announced that Co-CEO, Mr. Hannan Carmeli, has resigned from his position and will be leaving the Company. Mr. Carmeli previously held the titles of President and Chief Operating Officer, and was promoted to the Co-CEO position in June 2013. He will continue to serve the Company as long as needed to ensure a smooth transition. Dr. Moshe BenBassat, ClickSoftware’s Founder, will continue as CEO.

“The Board determined that having two leaders at the top of the Company was not practical, and that it was in the Company’s best interest to revert back to a more conventional structure of leadership under one CEO,” said Dr. Israel Borovich, ClickSoftware’s Chairman of the Board. “On behalf of ClickSoftware and the Board of Directors, I would like to thank Hannan for over 17 years of dedicated service to the Company, and wish him all the best for the future,” Dr. Borovich added.

Besides making it clear that Mr. Carmeli’s resignation probably was forced, the quote raises the interesting possibility that it may actually be Dr. Borovich who whacked Mr. Carmeli, not Dr. BenBassat, which could imply that Dr. Borovich is not the easy mark he may have appeared to be and may, in fact, have acted against Mr. Carmeli in order to put Dr. BenBassat on notice.

Much of the above is,of course, conjecture, but,given the Marchavallian nature of corporate powerplay — where, of course, the stakes are enormous — it seems pretty straightforward to me.

So?

And, so, either way, today’s announcement of Mr. Cameli’s resignation was not unexpected. For in the final henchman analysis, either Mr. Cameli was executed for the company’s failure in the prior quarter; or for the company’s failure in the current quarter; or for not understanding that his co-CEO role was, at best, ceremonial; or to eliminate lingering embarrassment; or as colateral damage in an emerging power struggle.

It is easy for us, by the way, to feel sorry for Mr. Carmeli, but I am not sure he would elicit much sympathy from Marchavelli, who would have figured Mr. Carmeli for dead the moment he accepted the co-CEO position in much the same way he would have assigned a zero probability of survival for a toddler being dropped in a well with two King Cobras. In fact, I suspect that Marchavelli’s take on the Mr. Carmeli’s demise would be rather Darwinian, in that, ipso facto, the events as they unfolded were proof that Mr. Carmeli was not worthy to be a prince.

By the way, it is, of course, possible that the onion has another layer, with, for instance, Mr. Carmeli having been in on the entire chain of events, perhaps seeking an early retirement or perhaps choosing to fall on the sword for his boss… If so, we are dealing with corporate abuse of the highest order, and, I am sure, we will never obtain confirmation.

Whichever way this really fell out, however, it is, for sure, not good news for the company, implying as a minimum, that the Board of Directors has little or no control over what goes on in the company (the promotion of Mr. Cameli to co-CEO in June, followed by his canning in August, does not exactly instill confidence in the competence of the Board of Directors,) and possibly indicating that the company’s Board of Directors is engaged in a power struggle, that the company’s CEO is on some sort of bender, or that the company’s third quarter results are going to be problematic.

The market, which has an uncanny ability to sass out issues in real-time, reacted immediately to the announcement, dropping the per share price by more than three percent at the opening of the trading.

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