Last year, I introduced a weekly series called “CEO Gaffe of the Week.” Having come across more than a handful of questionable executive decisions when compiling my list of the worst CEOs of 2011, I thought it could be a learning experience for all of us if I pointed out apparent gaffes as they occur. Trusting your investments begins with trusting the leadership at the top — and with leaders like these on your side, sometimes you don’t need enemies!
This week, how could I not turn my attention to William (Bill) Cobb, CEO of tax preparation company H&R Block, Inc. (NYSE:HRB) .
The dunce cap
There were plenty of reasons to give Bill Cobb a longevity gaffe award long before last week. Over the past decade or so, his company has allowed Intuit Inc. (NASDAQ:INTU) to completely steal the show when it comes to tax preparation software. According to COMSCORE, Inc. (NASDAQ:SCOR), TurboTax accounted for 59.8% of all DIY tax preparation last year with H&R Block, Inc. (NYSE:HRB)’s 14.7% market share even coming in behind Blucora Inc (NASDAQ:BCOR)‘s (formerly InfoSpace) TaxAct, which notched 17.7% of all DIY tax-prep market share. H&R Block lingered too long onto its bricks-and-mortar locations which still act as a drag on its operational performance.
However, even before TurboTax toppled H&R Block, Inc. (NYSE:HRB), H&R Block was making shoddy decisions with its mortgage loan portfolio. One of the primary reasons its share price lost about half its value between 2007 and 2009 had to do with the poor quality of its loan portfolio. In fact, without the added interest income of its mortgage loans, shareholders have seen revenue dip every year since 2008.
With tax season ramping up into high gear, this is the time of year where H&R Block is expected to strut its stuff through fancy TV advertisements and newly improved DIY tax prep software. Only it didn’t quite work out that way. In fact, we got word from the Internal Revenue Service on Tuesday that H&R Block’s DIY software had forgotten to fill out a critical portion of Form 8863 for education credits, specifically the American opportunity credit. H&R Block, Inc. (NYSE:HRB) confirmed these allegations later in the day that its software did indeed have an issue.
The end result is that, after waiting two extra weeks to file their returns this year, about 660,000 people (or 10% of the people who’ll claim an educational credit in a given year) are expected to have their tax refunds delayed by up to six additional weeks!