Founder's Syndrome and Activist Investors Ousting of CEOs

Founder's Syndrome and Activist Investors Ousting of CEOs

By Reza Ganjavi - 10 January 2023

Founder's Syndrome (Founderitis)

Founder's syndrome is when the company grows and gets to a point that requires management that is beyond the skill set, aptitude, talents of the founder. But the founder is not willing to let new, more qualified CEO take over the company. She or he is attached to the company they founded like their baby, even though their mismanagement is sinking the company.

I was a shareholder of two companies that had this problem and as an activist shareholder played a role in ousting of the founders -- at least what many people believe is that as an activist investor leader, I was instrumental in the ousting of the CEOs, based on our activist investor group's actions and the results. Mind you, activist investor groups are often institutional shareholders or hedge funds but we succeeded as a team of individuals.

Founder's Syndrome often happens when a scientist or doctor starts a company and does not have any management education and aptitude. There are many symptoms and consequences of that. Because they're weak CEOs and they're insecure, they bring people who are under themselves in terms of intelligence, vision, power, etc. -- and that backfires. They also often live in an illusion that everything is ok and point finger at external factors for the issues the company has which are result of their mismanagement.

Ousting of CEO Jack Leif, Co-Founder of Arena (ARNA)

Jack Lief was a nerdy CEO who co-founded Arena, a targeted GPCR company, which many years later - after we helped oust him, and a new CEO came - was sold to Pfizer.

He had all the typical characteristics of a founder's syndrome. He referred to the company in investor conferences as his baby. And he was a terrible CEO. Typical for founder's syndrome he outlived his competences and talents and the company needed new management, which Amit Munshi, the new CEO brought to the table and turned a failing company around and made a killing in terms of value of his stock when Pfizer bought the company.

Jack Lief, typical for weak CEOs, brought in people who were weaker than himself -- B players, like Craig Audet as head of regulatory affairs and head of IR who knew nothing about IR and had no experience in it and IR was a big failure. Here was the VP and chief of IR etc., responding to Jessica Fye of JP Morgan: "if I tell you I have to kill you"! Not the classiest response to a high profile analyst. I met with Craig at some point. He was shocked and dumbfounded at the attacks on the company by enemies of the company when you least expect it. But to me it was not surprising at all knowing how powerful and nasty short interest can be, which people like Craig just don't have the competence to address.

McGee whom Jack promoted big-time beyond her competences, held roles like VP of alliance management and VP of IR -- while she was a junior at IR and had no executive role in alliance management before -- and she did poorly in those roles.

  • Cindy McGee did not have any prior experience in Alliance Management “A.M.” before re-joining Arena to take on this position. Her past experience according to her Linkedin profile did not include any management or otherwise roles in A.M..

  • Her last position before taking on the VP position at Arena was a VP at Russo Partners, Arena’s communications firm which promotes itself as “At Russo Partners, communications counselors with PhDs, MDs, JDs and MBAs roll up their sleeves…”. Cindy did not have any of the above academic qualifications.

  • She was too junior in IR to be leading Arena's IR.

She studied for her MBA at Boots while at Arena and some people thought the company may be paying her tuition (very expensive). She did that while she was VP of global alliance management in charge of the company's most important relationship with Eisai. I also worked full time and studied for MBA part time. It can be done. But I was highly qualified for the job I had but we didn't believe Cindy was. She moved to Switzerland at some point to supposedly lead Arena's global alliances, when some people felt Jack had to keep her away for his own good as more things were coming to light. I hope she had a successful career holding jobs she was qualified for. I wish both Craig and Cindy well but Jack Lief had put them in the wrong roles. I met Cindy in Switzerland at a conference once. I met her at the FDA early on.

There were also allegations of nepotism at the company and about Jack Lief, and also around Cindy's promotion. People who cited this included some insiders referring to "water cooler talks", and certain observations. So it was mainly hearsay, but some promotions raised eyebrows.

Jack's own list of screw-ups was long. For example, I had evidence of alleged Selective Disclosure (SEC RegFD), where Jack told big investors one answer, and his IR told retail investors something contradictory which had negative financial repercussions -- or Jack allegedly telling one of our friends who was a large investor about an upcoming deal, which other investors were not informed of. I did a lot of research including talking with lawyers and to SEC's Disclosure Standards Office.

Many people attribute Jack Lief’s ousting to my efforts as lead investor activist. But many other investors on our team helped out - e.g. Attorney Joseph Dedvukaj, Attorney Marc Bresenoff, Dr. Joseph Dinchuk, Dr. Steven Vig, Dr. and several other great people. On our team we had several MDs, PHDs, MBAs and attorneys -- and we really held the company to account.

I believe the straw that broke the camel's back was a threat of a derivative lawsuit I was about to file against the Board of Directors, on behalf of the company.

I had a call with Jack Lief and his right-hand-man whom many blamed for helping Jack maintain power, Steven Spector - a nice man and competent internal legal counsel but us shareholders did not like him in his role as Jack's right hand man, and his regular selling of shares, etc.

In that call I asked Jack about succession planning. He had none. Typical in founder's syndrome. The founder has no plans to go, and doesn't even want to think about succession.

I even set up a website that contained many letters investors wrote asking Jack to step down.

In October 2015 the Board of Directors finally ousted Jack Lief. They finally turned on him. Their alternative was to face a derivative lawsuit for breach of fiduciary duties, gross negligence, and other causes of action. Jack had stacked the Board with his buddies but even they saw the light finally after the stock price dived 85%.

Prior to that aha moment, the Board and Jack were engaged in mutual backscratching, and giving themselves big raises even in years when the company and market cap lost a lot of value.

But Jack remained on the website. We contacted the company and asked them to pull down Jack from the website too, and they did. That's how angry investors were at the damage Jack did to the company. But he left with a huge golden parachute. $1.8 millions in severance pay plus plus. We estimate Jack made some 20 million dollars during the 20 years while shareholder value tanked 90%. Jack's salary was about $5000 a day, while company was losing Billions in company value.

Aside from heavy correspondence with the Board (and I personally wrote lots of letters), our activist group also played a role in nominating new Directors, and liaised with institutional shareholders.

Jack was a master of disaster communications. When he went on national TV I think hedge fund shorts popped Champaign because he was bound to screw up. He gave most nerdy out of touch answers and totally missed the opportunity to say something meaningful. One of his classic gaffs was: "As investors and people will see this year we're basically with our pipeline advancing into phase 2 programs blah blah" - Jack Lief, February 24, 2015, RBC Capital Markets. Yes investors for Jack were not people, they were ATM machines to fund his incompetent role.

The company restrained its own CEO from talking with investors alone. They required that whenever Jack talks to investors someone else has to be there (to make sure Jack doesn't screw up. I believe this was done in reaction to what our activist group pointed out to the company and our stern demand for fair disclosure. As is, it's not a level playing field for retail investors, and selective disclosure makes it even worse - and is unlawful.

Some people thought Jack is in bed with shorts. We never had hard evidence of this but the very speculation shows how terrible a CEO must be that people speculate he's colluding with shorts to help them profit. Jack did not have a fighting bone. Perfect punching bag for shorts. Jack was too timid to even fight patent infringement when we built a perfect case for them illustrating large scale infringement, together with solid evidence.

At some point they brought Scott Rieger as IR Director but he was kept under the radar. It seemed Jack was restraining him in his typical founder syndrome micro management and control freak style, while Jack had no competence in IR.

Going through my notes as I write this article, it's a painful reminder of how many areas the company mismanaged because Jack didn't have the competence of being CEO at that stage of Arena's development. A few years later, under a new CEO, whom I also helped and advised as he had inherited a mess (founder syndrome corporate culture continues even after a founder is gone in form of institutional memory). the company was bought out by Pfizer for $6.7 Billion.

Ousting of CEO Mike Kauffman, Co-Founder of Karyopharm (KPTI)

The big mistake I made in my due diligence about Karyopharm was that I was so excited about the science of inhibition of nuclear export (XPO1) that I didn't check the CEO's profile. Had I noticed that he was a Medical Doctor and not a businessman and that he had never run a company successfully I would have never bought the stock. I did and suffered as a result of Mike Kauffman's mismanagement.

I must say I respect Dr. Kauffman as a very competent and accomplished scientist and doctor but as a CEO he was a disaster. His wife Dr. Sharon Shacham, an absolutely brilliant an classy, wonderful lady invented Selinexor in her kitchen in Israel! If Archimedes of Syracuse could have his great insight in a bath tub, Dr. Shacham could have it in the kitchen.

I had a zoom call with Dr. Shacham and later Dr. Kauffman. Several things became very clear to me:

1) Selinexor is absolutely great and has great potentials

2) Dr. Kauffman is not fit to be the CEO

3) They had overtures from big pharma but they said "not yet"

4) They think the company will be bought out but they want it bought by a "Ivy League" company.

5) Dr. Kauffman knows the company needs better leadership and he will step down but way down the road.

I firmly believe Dr. Kauffman had no desire to step down for some time to come - because of the very Founder's Syndrome which he might not have even realized -- and the associated desire to be in control -- to get his hefty salary, stock options, etc., and continue to dump his shares every month to the tune of $50,000 a month because his multiple financial advisors told him being so heavily concentrated in one stock is a bad idea (true).

The bad news for him was that he had run the company to the ground. Last raise they did was in the 20's and they burned through massive amounts of cash and yes they had scientific achievements - but - company valued dropped like a rock.

Having come from several biotech investing experience, leading activist investor groups, wrestling with Wall Street crooks like Martin Shkreli, short sellers, hedge funds, discussions with SEC, helping FINRA, and having gone through business school (MBA from UC Irvine), I had the relative knowledge and experience under my belt to see the trends.

Another thing that stood out was what Guy Kawasaki and Steve Jobs talked about:

"My theory is that A players hire people even better than themselves. It’s clear, though, that B players hire C players so they can feel superior to them, and C players hire D players. If you start hiring B players, expect what Steve [Jobs] called ‘the bozo explosion’ to happen in your organization."- Guy Kawasaki, Chief Evangelist, Apple

I researched the backgrounds of the executives and it became evident in my view, that Mike Mano (Legal Counsel) and Mike Mason (CFO), while both very nice people, are not at the level Karyopharm needs, for several reasons.

Dr. Kauffman was a C player himself and he hired some D players in my view, based on the challenges Karyopharm was facing (a huge short interest, organized attacks by agents of shorts, run away expenses, founder's syndrome, etc.).

However, initially my focus was on Dr. Kauffman -- it was very clear to me that he should not serve as CEO one day more than necessary -- and that his idea that eventually some day he will go was not going to work.

I raised issues with the Board of Directors in a number of letters. Shortly after, Michael was replaced by Richard Paulson. The timing came as a shock to many but not to me. I am not taking credit for it but many people who were familiar with the situation and my level of engagement, attributed ousting of CEO Michael Kauffman to my efforts.

After Richard came on board, our investor activist team sent him a big letter with a number of tips.

I believe Mike Mano (Legal Counsel) and Mike Mason (CFO) continue to be unfit for the profile Karyopharm needs. I warned Richard Paulson about this a long time ago but I think he is so optimistic about the silence that he's turning a blind eye to the necessity of key competences that impact company value.

Maybe it's time for Richard to go if he cannot bring the necessary reform that translates into company value.


Adamis (ADMP) Founder / Nerdy CEO Dennis Carlo Ran The Company To The Ground

I wrote to the San Diego's Adamis co-founder and CEO Dennis Carlo warning him a couple of years before the company sank. It was a typical and severe case of founder's syndrome which was so obvious to me and others I suppose but not to the myopic founder. He was a nerdy biotech researcher with no competence for running a company. He finally quit when he saw the writing on the wall. The company continued going down from that point onwards.

Here's my email to him - I was not happy to see yet another case of founder's syndrome which hurts a company's shareholders.

Dennis Carlo: Another Case of Founder's Syndrome

by Reza Ganjavi


Dr. Carlo

Your desperate hanging to the CEO position is what's killing this company. Wake Up! You have a fiduciary responsibility to shareholders. It won't be very pleasant to get kicked out by your own board. Let Go. What's it going to take for you to realize you're destroying this company and you don't see it b/c you seem to be mentally myopic and in delusion that you can do what you can't do. Look at your history / record and how you've destroyed shareholder value. Your line that sales will save you is nonsense.

CEOs like you destroy shareholder value by not letting a competent CEO build shareholder value. Announce you're stepping down as CEO and see how the investment community will rejoice.

Reza Ganjavi

UPDATE 12-Dec-2019

I DUMPED by ADMP when I realized it's "infected" with Founder's Syndrome. I made a small profit and a good lesson to NEVER invest in a company without first evaluating the CEO and making sure there's no Founder Syndrome which cripples many good companies. ADMP tanked after I sold -- it lost 50% of its value.

I'm done with ADMP. Even if it gets approval, as long as Dr. Carlo is a CEO I'm not touching the stock.

UPDATE 26-Nov-2019

Letter to Dennis Carlo, CEO of Adamis.


Dr. Carlo

The finger you're pointing OUT THERE to FDA etc., should be pointed inward. The problem is YOU and not willing to let go and have professional management with formal business and management education run the company. Your hack job has cost shareholders a lot of money over the years. Time to step down and give up the salary you don't deserve and your attachment which is killing Adamis. Stick to your science. Step aside. There's still a chance to save this company despite your disastrous management as a CEO for shareholder value.

And you think all these people who've been telling you what you ignore for a long time will be proven wrong by actual sales, a clueless idea which further proves my point. LET GO. Give up. Retire. Let Adamis breath and thrive WITHOUT you at the helm.


R. Ganjavi


UPDATE 25-Nov-2019


Sorry for my ADMP friends. Blame the CEO for the company's misfortunes. The buck stops at the top.

The problem with Adamis is Dr. Carlo in CEO role. He likes to blame the FDA but the problem is him. Dr. Carlo you should resign. I'm no longer a shareholder so I don't care if you do or not but you really should. I urge long term holders to lobby to get the board to fire Dr. Carlo from his CEO position, and keep him as a good scientist which he is. Disaster of a CEO as measured by his track record of consistently eroding shareholder value.

UPDATE 14-Nov-2019


ADMP's problem is the CEO's attachment to his power seat. I wrote about it here and will formulate a full article or video on Founders Syndrome. Pain we went through with Jack Lief is priceless model. CEO is sure the company will have good sales and be profitable (sales already ramped up last quarter) but I guess he sucks at alliance management, winning Wall Street trust, etc.


Dear Adamis Executive Management

If any of you get my point, please try to convey it to the boss, Dr. Carlo, and help him wake up from his delusional myopic dream that just because he founded the company -- despite his total lack of formal education in business and management, he should hang on to his "baby" and thus, prevent it from being run by professional management who understand management science and so many aspects of it as it directly pertains to Adamis which Dr. Carlo seems to be ineffective at, to put it mildly.

Adamis has good science and obviously good people work there. Dr. Carlo himself is a tremendous asset but just as you wouldn't let a grocer do knee surgery, he needs to let to LET GO of his baby and his egotistic, selfish attachment for the benefit of the baby.

This is a classic case of Founder's Syndrome, in so very many ways.

I have laid this out in detail for a presentation to Dr. Carlo but he's ignored my email so far. I hope to hear from him. Next steps will be the Board and litigation if need be.

Here are a few notes I sent in, just to convey the point -- but I have a well organized presentation that elaborates on this very serious problem and overhang on the stock. I believe Dr. Carlo's Founder's Syndrome is the single biggest overhang on the stock.


Reza Ganjavi, MBA



When are you going to get a competent CEO who has business economics and management education and aptitude? When is Dr. Carlo going to step aside as a CEO and let a CEO who understands what it means to "build shareholder value" and can execute. Current CEO has been burning through a ton of cash while consistently failing shareholders as evidenced by constant destruction of shareholder value measured by company value.


Believing a company is undervalued when you do not understand what shareholder value means has no significance. That requires understanding basic Business School concepts which Dr. Carlo never went to.

Demand for shares is not only a function of sales Dr. Carlo. You have that VERY VERY VERY WRONG because you have shown to be unfit to serve as a CEO as measured by change in shareholder value (destruction of which under your watch).

Demand for shares of a company is directly correlated to trust in the CEO. Despite your road show etc etc you have failed to attract institutional interest beyond 12%. This is another FAILURE. WAKE UP DR. CARLO.

Institutions look forward and don't valuate a company based on actual sales. This is another fact that shows how WRONG you are because you don't get it. You have lots of patents in medicine, but you need to step aside as CEO. You're ruining this company's value. Do you know how to calculate the value? That is your grade card. And it's a BIG FAT "F". Your delusions are the biggest overhang on this stock. Good science is blocked by your ego and attachment and delusion that you can do what you obviously cannot do. When will you step aside?


Today's press release, aside from having punctuation errors, gives me the following opinions / impressions:

1) Incompetent alliance management

2) Utterly incompetent management regarding shareholder value and not having a clue about basic concepts taught at Business Schools -- and what it means to build shareholder value -- and is stuck in a delusion that techies often fall into: that we do the right technical things and everything will take care of itself. WRONG.

Dr. Carlo, you have a lot of options. For God's sake, for shareholder's sake, WAKE UP and realize how you've apparently been running this company into the ground by not having the right qualifications to be a CEO. Your 22 patents are great but you have no formal management or business or economics education.

Yet, you're making a TON of money off shareholders funding your dreams, which is not the role of shareholders. It's your role and duty to build shareholder wealth, to make shareholder money grow, and not the other way around: shareholder value shrinking as you make a ton of money and not doing your job of building shareholder value.

Your options will be worth a lot if you step aside. The best gift you can give to shareholders is an announcement TODAY in the conference call that you're looking to step aside as CEO. The stock will rally -- I promise you.

The alternative is eventual bankruptcy, and probably before that, you getting fired in an unpleasant way as has happened to other CEOs suffering from "Founders Syndrome".


R. Ganjavi

LETTER 12-Nov-2019 [SAFE HARBOR...]

To: Mark Flather & Dennis Carlo @Adamispharma


I emailed to see if this is Dr. Carlo's correct email address. Also left a message for him. No response. Also left a message for you. No response.

Please convey to Dr. Carlo, regarding today's conference call and press release, what Safe Harbor Provision is. Reviewing past communications it seems that Dr. Carlo is scared of promoting the company and effectively using Safe Harbor which allows management to make forward looking statements in promoting a company truthfully and in good faith.

Dr. Carlo should remain with the company as a scientific advisor and let a younger, energetic CEO with an MBA, solid experience in building shareholder value, business, communication, marketing, promotion, alliance management, etc. -- all areas which in my opinion Dr. Carlo is lagging. He's a great scientist but a failure as a CEO, in my opinion and the proof is, if you invested $10,000 in Dr. Carlo's venture in 2006, it'd be around $47 today.

Please confirm his correct email as I need to share a very important communication with him.

Reminder: this is a public company and not a private club, and management work for shareholders. Adamis appears to have been operating in a modus operandi of treating shareholders as ATM machines (again, typical of F.S.), making a lot of effort but not delivering results. Soon enough will be enough and management will have to face the consequences of its terrible performance and be accountable to shareholders.

The institutional number being so low is another sign of utter failure of this management team.

I am still waiting for you to call me back Mark. I have some important questions for you. [I did talk to him].

Thanks & Regards

Reza Ganjavi

Dendreon (DNDN)

Another case of Medical Doctor CEO running a company to the ground: Dr. Mitch Gold made $29 million on Dendreon stock and then ran the company into the ground.