What is ‘Mad Hatter’
A mad hatter is a chief executive officer (CEO) or managerial team whose ability to lead a company is highly suspect. Mad hatter CEOs are often characterized by misconduct or impulsive and puzzling decisions, which employees, board members and shareholders may question. Mad-hatter CEOs often take spontaneous actions with little regard for viable alternatives or the consequences.
Explaining ‘Mad Hatter’
“Mad Hatter” refers to one of the many strange characters in Lewis Carroll’s “Alice’s Adventures in Wonderland.” At the tea table, Alice meets the Mad Hatter, who is eternally caught in tea time and constantly quizzes Alice with nonsensical and unanswerable questions. Typically, mad-hatter CEOs are either removed or stay in power until their companies are run into the ground.
Mad Hatters and Shareholder Activism
Shareholder activism is often criticized as being based on generating short-term gains by corporate raiders regardless of long-term costs, but the removal of a mad-hatter CEO of public a company can be the difference between its survival and failure. Shareholder activism can take the form of proxy battles, litigation or publicity campaigns as shareholder votes are collected to oust the CEO or the management team.
Mad Hatters and the Board of Directors
While he was not directly labeled as a mad hatter, Dov Charney, founder and CEO of American Apparel Inc., exhibited many of the traits exhibited by mad-hatter leaders. After 25 years as the CEO of company, he was ousted by the board of directors in 2014 after years of allegations of misconduct with female employees, poor judgment and bad decisions. After his firing, the company filed for Chapter 11 bankruptcy in October 2015 and emerged from reorganization in January 2016.