If you have not seen the Gibson Guitar Company bankruptcy news, it’s an interesting saga. There is a good business case study that business students can review for insights. The main issues, as I see them, serve as a great beacon of guidance in the too often murky corporate sea:

1. Excessive Company Debt. They bought a pastiche of other companies they didn’t understand in an effort to become a “lifestyle brand.” The companies did not do well and the debt they acquired eventually sank them.

2. Buy/Invest in What You Understand. They bought businesses that are rather foreign to a guitar making business, like home audio and editing software.

3. Listen to Your Customers. Over time the executives stopped listening to their genuine customers, and tried to force unwanted things and had to backtrack big time. As much as our clients may drive us bonkers sometimes, they are the reason we can stay in business. The client is the ultimate boss.

4. Oversight & Accountability. One man, Henry J., owned the majority share of the company, and has acted as CEO for 30 years. It became very clear in recent years that he ruled by fiat and a lot of good people had left the company because of him. A large part of that was accountability. As CEO and major owner, he could “do what thou wilt.”

The main issue stems from a CEO without accountability. It is from this source that the other issues flowed. No one could or would check his power, since the company was privately held.

While the saga is still unfolding, it will be under new ownership, with a different captain at the helm. Let’s hope they can right the ship and sail on.

Court docs are here: https://new.reorg-research.com/data/firstday/437046_0.pdf

Additional fun and facts: http://www.mylespaul.com/threads/gibson-files-for-bankruptcy-protection.410152/