In 2016, when cybersecurity industry giant Symantec purchased rival Blue Coat for $4.65 billion, Symantec’s board of directors made the unusual decision to install Blue Coat’s CEO, Greg Clark, as chief executive of the combined company.
The decision was not only rare as a matter of course – usually the CEO of an acquired company is among the first to receive a golden parachute – but also because Clark, despite his success at Blue Coat, has long been perceived as an unconventional leader.
Andrew Plato, a veteran cybersecurity executive who consulted on Bain Capital’s 2015 purchase of Blue Coat, perhaps best captured industry sentiment when he called it a “crazy, bold move” to put Clark in charge of Symantec, describing aspects of his leadership style as “colorful,” “annoying” and “amateur.” In handicapping Clark’s likelihood of success, Plato said his zeal and spark may “reignite the innovation Symantec once had,” or could “detonate the business and leave a smoking crater.”
For a while, Clark’s approach was working: He made a rash of acquisitions and divestitures, including selling Veritas and buying Lifelock, and Symantec’s revenue numbers and stock price showed steady improvement.
That is, until earlier this year, when Symantec’s guidance slipped below expectations, causing its stock price to plummet, and an internal investigation found the company had improperly recognised $12m in revenue, requiring revisions to its past financial results.
The Symantec shareholder lawsuit
As it turns out, that was only the beginning of what may be a large impact crater of sorts. A shareholder lawsuit, filed in May but recently revealed in detail for the first time, alleges that Symantec and its leadership intentionally manipulated financial results in order to reach executive bonus compensation targets, ultimately harming the company and its shareholders.
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The suit itself reads like the draft of a Martin Scorsese film. Clark, named in the suit along with CFO Nick Noviello and Symantec’s former Chief Accounting Officer Mark Garfield, allegedly encouraged efforts to “manipulate or adjust revenue by various periods or a year,” despite such tactics being in conflict with the generally accepted accounting principles (GAAP) adopted by the U.S. Securities and Exchange Commission.
There was no accounting rule, the suit alleges, that Clark and Symantec couldn’t break: operating expenses were misclassified in order to appear more favourable; false orders would be processed and then cancelled to appear as if quarterly targets had been reached; sales staff pressured customers into commitments they did not want to make; and at least one accounting executive was essentially bribed in order to ignore the improprieties.
Additionally, a whistleblower said a number of internal investigations have been conducted to explore alleged unethical behavior by the former Blue Coat executives, believed to be related to the use of company expenses and resources to close deals.
The ongoing fallout from the Symantec shareholder lawsuit
Just hours after the details of the suit were published, Symantec announced that President and COO Michael Fey, another former Blue Coat executive, would resign. Clark, however, will remain CEO, inheriting the title of president.
It is unclear how the case will evolve; it is pending before Judge William H. Alsup in the United States District Court for the Northern District of California.
Clark’s future at Symantec will likely be tied to any resulting SEC action as more information related to the shareholder lawsuit emerges. Its board of directors, including Symantec Chairman and PayPal CEO Daniel Schulman, will be compelled to reexamine whether the former Blue Coat executives have had a positive impact on Symantec’s business practices and corporate culture.
Barring all that, 30 months into Clark’s tenure at Symantec, it remains to be seen whether his strategy is really working, or if this is just another Symantec reinvention gone awry.