Management Turnover as Change Agent

Monday, December 31, 2007

CEO Watch - Circuit City, Philip J. Schoonover

Circuit City's CC (NYSE) momentous decline over the last year and a half has come while its chief competitor, Best Buy has followed an opposite path. Each problematic announcement from the company over the last year should have been enough for the board to consider replacing Philip Schoonover as CEO. The most recent bad news has forced me to finally include Schoonover in my CEO Watch list. Schoonover became CEO at Circuit City back in June 2006 and has failed to do much positive for the firm since his appointment.

Stay tuned. The company needs a major shift in strategy and new blood if it ever is going to get itself going again and turn itself around.

For more:

24/7 Wall Street

Wednesday, December 26, 2007

Universal Stainless Appoints New President and CEO

Universal Stainless and Alloy Products, Inc. USAP (NASDAQ), the specialty steel manufacturer whose products are sold to rerollers, forgers, service centers, OEMs and wire redrawers, tapped Dennis A. Oates as the president and CEO of the company. Oates will replace founder and long-time CEO (1994) and chairman Clarence McAnich. McAnich will remain chairman. The appointment is a definite positive for the firm. Oates will officially take his positions on January 2.

Earlier in the year, Universal brought in Kenneth Matz as president. At the time, he was considered heir apparent to McAnich's CEO position once the head of the company decided to hand over the reins of the CEO position. Matz left the company recently to pursue other opportunities. According to the Pittsburgh Business Times,
Oates ... most recently served as vice president of the specialty alloys operation of Carpenter Technology, based in Wyomissing, Pa. He also served as president and CEO of TW Metals in Birmingham, Ala., and president and COO of Connell Limited Partnership, a privately held metals recycling and fabrication firm based in Boston.
In statement McAnich said,
Oates is "the right person to lead our company going forward."

"I have known Dennis for many years," McAninch said. "He is sharp, tough and highly knowledgeable about the global specialty steel business from both the manufacturing and distribution sides of our industry."
Oates appointment is a relief, it seemed to appear that McAnich might not have been willing to give up some of the reins which could have turned into a problem for the firm going forward.

Keep a close eye on Oates and what he does for Universal and whether or not McAnich really begins to give up the reins of running the company.

For more:


Recommended Reading - Why the CFO’s first 100 days at work matter a Wall Street Journal site summarized a recent survey and study conducted by McKinsey regarding the role new CFOs played during their first 100 days in office. The findings were worth examining. Financial Week's Matthew Quinn summarized the report as follows:
Newly appointed CFOs may not be spending enough time on crucial issues such as understanding the drivers of their business, working on corporate strategy and building their finance team in their first one hundred days...
Check it out.

Friday, December 21, 2007

Cisco Succession Planning Takes A Second Hit

Cisco Systems, Inc., CSCO (NASDAQ) the networking gear maker lost another top executive, Charles Giancarlo - the chief development officer, who had been rumored to be heir-apparent to John Chambers (CEO). He resigned to join the private equity firm Silver Lake Partners. Earlier in the year, another top level executive, Michelangelo Volpi, resigned. Volpi was the Senior Vice President and General Manager of the Routing and Service Provider Group and was also considered a potential successor to Chambers. He left and ultimately joined the Internet TV firm, Joost.

According to the U.K. Register, Giancarlo,
... told reporters in a conference call yesterday that Cisco's management restructure did not fit with his ambitions to be at the helm of a company.

In a story by Mark Boslet in the Mercury News further elaboration was provided about Giancarlo's decision.

Rumors about his (Giancarlo) possible departure began spreading nearly a month ago after Chambers told the board earlier this year he would remain for three to five more years.

Observers said differences in style between Giancarlo and Chambers may have discouraged him about his chances to lead the company. "Charlie and John are very different people," said Tom Nolle, president of market researcher CIMI of Voorhees, N.J. "Charlie is much more of an intellectual. John is the ultimate salesman - he's a showman."

For better or worse, Chambers has put in place a new management structure. Chambers said the new management structure would,
"transition from a company that is driven from command and control to one that is built on teamwork and collaboration." ... “I believe this type of structure will be the future, given the complexities and ... market adjacencies we’re going to move into.”
As Cisco continues to thrive, will the so called "new management structure" have an impact on the firm? Will things remain the same or will there be real changes and what will be the results?

Stay tuned.

For more:

The Houston Chronicle
Times Online

Thursday, December 20, 2007

Zale Jewelers Trys to Shine With New CEO

Zale Corporation ZLC (NYSE), the long troubled North American specialty jewelry retailer, announced the resignation of its current CEO, Betsy Burton along with the appointment of her replacement Neal Goldberg, who had previously served as President of the troubled children's retailer, The Children's Place Retail Stores. The management change comes in the wake of increased activist (hedge funds - Breeden Capital, Citadel LP, SAC all of whom made 13D filings) involvement in the company and a continuing decline in the company's performance despite a real change in corporate strategy.

Burton had only been CEO since February 2007 and served as acting CEO since February 2006. She has been on the company's board since 2003. Just as her replacement Neal Goldberg, Burton had an extensive retailing background. At the time she had been appointed as permanent CEO, Richard C. Marcus who was the Chairman of the Board said,
"Betsy has done a superb job running the Company since February. Under her leadership, we are moving forward with a customer-centric strategy that leverages our fundamental strengths to regain market share, improve profitability and create value for shareholders. Betsy is an experienced executive with an outstanding record of leadership and a deep knowledge of Zale. Along with the strong management team we have put in place in recent months, Zale now has the right leadership to realize our long-term growth potential."
Burton went on to shift the focus of the firm back to its more original retail strategy. According to the Dallas Morning News, Burton while interim CEO was quoted saying,
...the company believes the plan adopted by Leonard and former Zale CEO Mary Forte, who quit January 30, to market to higher-income customers and try to get product direct from foreign suppliers had not worked, and the company would go back to targeting average-income Americans.
Since Marcus's announcement on the appointment of Burton, a new Chairman, John B. Lowe Jr., has taken over and numerous management changes have occurred and yet, the company has continued to under-perform. In today's announcement, the new Chairman, John B. Lowe Jr., said Goldberg,
"has a unique combination of retail experience, leadership and team-building skills, and talent to move the company forward, building on the progress that has already been achieved."
Different Chairman same sentiments as when Burton was appointed. While Goldberg appears to have the right background and experience, he is coming from another retailer that recently has been under the gun (check the blog). The real question for me is what do the activist shareholders, who hold over 18% of the stock, plan to do? Zale has been floundering for a long time despite continuing efforts to turn itself around.

Stay tuned and make sure to watch both Goldberg and the outside activist investors (Breeden, Citadel and SAC).

For more see:

Dallas Morning News
Diamond Intelligence Briefs
Houston Chronicle
Gerson Lehrman Group 13D Tracker

Wednesday, December 19, 2007

New Ways To Avoid the CEO Watch List

Surprise, surprise, Wall Street CEOs have discovered a new tool to save their jobs or at least their reputation. Some of the CEOs who had the potential to be on my CEO Watch List have chosen to pass on bonuses. You did not read this wrong, they chose to pass. Here's a brief list: John Mack, Morgan Stanley and James Cayne, Bear Stearns, more can be expected.

Peter Cohan of BloggingStocks has a slightly different take on why the CEOs decided to forgo a bonus. Here is what he said,
Why are they doing this? Because it's going to make it easier for them to stiff lots of employees who they don't think will be essential to making a profit in 2008 and 2009. Investment banks have less bonus money to go around and they will try hard to pay enough to their top performers to keep them from jumping ship. If they can keep these top performers around, then they will be able to reap the rewards in the future. In the meantime, those no-bonus CEOs will need to make do with the hundreds of millions they've gotten in the last few years.
Whatever the reason, it is definitely a new approach.

For more:

NY Times (Update Dec. 21)
CNN Money (Update Dec. 21)
CNN Money
Investment News

Tuesday, December 18, 2007

Recommended Reading - More corporate execs concede to shareholder demands to avoid showdowns, possible ouster

According to a story by Matthew Scott in today's Financial News,
Companies are making more concessions to prevent shareholder proposals from getting onto proxy ballots, according to the latest corporate governance review by corporate governance consulting firm Georgeson.
Is the balance of power actually shifting away from top executives? Not likely, but there is somewhat of a slight shift. For the full study click here.

Recommended Reading - More Boards Seek Directors Who Aren't CEOs

Joann S. Lublin wrote a piece in yesterday's Wall Street Journal entitled, More Boards Seek Directors Who Aren't CEOs. In the story Lublin writes,
Non-CEO executives accounted for 29% of new independent directors on boards of Standard & Poor's 500 concerns, according to an analysis of recent proxy statements by recruiters SpencerStuart. That's up from 18% in 2001. (Both figures include some retirees.) Those ranks will keep growing, predicts Julie Daum, head of the search firm's U.S. board practice. Boards "are looking for different kinds of skills," she says.
For more on the story click here.

Correction - CEO Watch - AMD, Hector Ruiz

Apparently Hector Ruiz, CEO of AMD, did not get a raise as I indicated in an earlier blog on AMD. According to a piece in HotHardware today,
It turns out that a senior member of AMD's public relations staff erred when confirming Thursday afternoon--prior to publishing this report--that Hector was given a raise this week. The raise in question actually came last year, and the $1,046,358 in the proxy statement reflected that Hector spent part of 2006 making $950,000, and part of 2006 making $1,124,000. Hector's annual salary rate has changed slightly since then, but by just $24,000 or so to reflect a different accounting treatment of a car expense.
Raise or no raise he is still one of the highest if not highest paid semiconductor CEOs and what is AMD getting from him for such large pay? He remains on my CEO Watch List.



CEO Watch - Sprint Nextel Update 3, New CEO Appointed

Sprint Nextel Corp S (NYSE) selected Embarq Corp EQ (NYSE) CEO Dan Hesse as its new president and chief executive. Hesse, 54, is somewhat familiar with Sprint. He worked at the company's local phone service division for a year before it was spun off to create Embarq. A number of analysts considered Hesse a potential candidate to replace Gary Forsee, who resigned as Sprint CEO in October. Forsee left the firm after the company bled customers for more than a year and lost market share to rivals.

Hesse's appointment seems to have been a safe choice. It's unclear whether safe is exactly what Sprint really needs at the moment. At least the waiting is over and the company can now start to move on to make the necessary decisions to try and get itself back on track. Hesse's appointment comes after it became known that Sprint rejected a $5 billion offer after it had been approached by former Sprint Chairman Tim Donahue, South Korea's SK Telecom Co Ltd and Providence Equity Partners.

Investors need to keep an extremely close eye on Hesse and his team as we move forward. Sprint remains in trouble and we will just have wait and see what the new management can do to reverse the firm's problems.

For more:

CNN Money
Red Herring
Deal Journal
Barron's Tech Trader Online
Kansas City Business Journal
Kansas City Star
24/7 Wall Street

Monday, December 17, 2007

Recommended Reading - Succession Planning From Wharton

Knowledge@Wharton on November 27 published a superb article entitled, CEO Succession: Has Grooming Talent on the Inside Gone by the Wayside?
According to Wharton faculty members ... say, companies are increasingly looking to fill top spots with external candidates, while placing less emphasis on grooming employees to fill those roles.

... "The trend line from 1970 to 2000 shows a slow but steady increase in the number of companies that look to the outside in the case of a departing CEO," says Wharton management professor Michael Useem, director of the school's Center for Leadership and Change Management. "At the start of that period, one in seven new CEOs at major companies came from outside the firm; by the end, one in four."
The article breaks down into separate analyses of a different Wharton professors, who specialize in Leadership and Management. For the entire piece click here.

Recommended Reading - Interview with Cambell's Soup's CEO on Leadership

This morning on National Public Radio's Marketplace, Doug Conant, Cambell Soup's president and CEO, spoke with Kai Ryssdal about studying hard to stay on top of his game. The interview is short but worthwhile.

Friday, December 14, 2007

Recommended Reading - Looking For A Few Good CEOs

A December 13 blog from focused on the problems related to finding effective CEOs. The story is based on an October study by the Society of Human Resource Management Foundation. The 79 page study is a worthwhile read for people immersed in these problems or you can read the summary.

CEO Watch - AMD, Hector Ruiz, Update 2

As AMD continues to decline while Intel's soars, AMD's board continues to keep its collective head in the sand. They recently agreed to raise Ruiz's compensation. Living in denial can only go on for so long. Even Ruiz himself admits AMD has failed in its contest with Intel. Ruiz was quoted in a recent analysts meeting where he stated,
"We blew it and we're very humbled by it and we learned from it and we're not going to do it again."
I continue to keep Ruiz on the top of my CEO Watch list. For more on Ruiz's latest compensation increase check out PC Advisor.

For more:

Ars Technica
Huffington Post
EE Times
XBit Labs

Wednesday, December 12, 2007

Federal Signal's CEO To Resign

Early today Federal Signal FSS (NYSE), which makes fire trucks, safety gear and street cleaning vehicles, announced that its president and CEO, Richard Welding, will resign. The company named James Goodwin as interim President and CEO while the Company finds a successor. For some time now, the company has been under-performing.

Welding's resignation is a good sign for the company. He has had more than sufficient time to get the company moving in a really positive direction but nothing he has done has seemed to succeed. The real question is whether Federal Signal can find the right executive to take on the company's challenges.

Keep a close eye on who the company picks to succeed Welding and what the firm does in the interim period before a successor is chosen.

Update on The Gap

Back in July, The Gap GPS (NYSE) made a surprise CEO appointment. The company picked Glenn Murphy, a successful drugstore executive, as its new CEO. Prior to Murphy's appointment, The Gap was often being written off by many analysts and investors. It could be that Murphy may turn out to be a super appointment.

The Gap has managed to surprise many lately. According to a story today by Heather Burke for Bloomberg entitled, Gap First Holiday-Quarter Profit Gain Since '05 Signals Rebound, the company,
By refusing to join competitors making early-holiday markdowns, the biggest U.S. clothing retailer may post a fourth- quarter profit gain for the first time since 2005.
... After two years of declining sales, San Francisco-based Gap has cut inventory at its namesake brand to avoid having to slash prices on $98 cashmere sweaters and $148 tweed coats in what may be the slowest Christmas shopping season in five years.
The article points specifically to Gap's brand president, Marka Hansen, as the key behind the change but Murphy is close by. The article went on to point out,
Of 25 analysts who follow Gap, 12 recommend buying the shares, 11 say to hold them and two say to sell, according to data compiled by Bloomberg.
Keep a close eye on the steps The Gap follows to continue its potential comeback.

Tuesday, December 11, 2007

CEO Watch - Citigroup Update 2 - Pandit Gets the Nod

Vikram Pandit was appointed Citgroup's new CEO today. For details read Eric Dash's story in The New York Times piece. The bank also picked Winfried F. W. Bischoff, the acting chef executive, as chairman.

For more:

CNN Money (Fortune)
Crain's New York
CNN Money
Washington Post
USA Today

Recommended Reading - ‘My position is not in jeopardy,’ UBS boss says after fresh hit

As the credit mess continues to take its pound of flesh, Marcel Ospel, the Chairman of UBS, the bank that just announced a $10 billion write down, insisted his position is not at risk. For more on his proclamation, read Christine Seib's piece in today's TimesOnline.

For more:

Financial Times

Double Eagle Petroleum Doubles Management Changes

Double Eagle Petroleum DBLE (NASDAQ), an oil and gas exploration company in the Rocky Mountains of Utah and Wyoming, is about to lose both its CEO and CFO.

Today the company announced its Board of Directors appointed Kurtis Hooley, the current director of business development and financial planning, to be its Chief Financial Officer. Prior to joining the company, Hooley served as the President of MKH Enterprises from 2003 to 2006. Hooley replaces Lonnie Brock, who on December 5, 2007 notified the company of his resignation in order to take a position with another company. Brock will remain at Double Eagle through December 31, 2007 and will assist in the transition to the new CFO. Five days after the Brock announcement, Stephen Hollis, the company's CEO since 1994 and a long-time employee of the firm, notified the company's Board of Directors that he desired to resign from his position as CEO and Chairman as of December 31, 2007. Hollis indicated he was willing to continue as an employee to provide advice and expertise concerning the Company's operations for at least an additional year through December 31, 2008. He will continue as a member of the Company's Board of Directors.

The company's press release stated,
Neither Mr. Brock nor Mr. Hollis resigned from their respective positions due to any disagreement with the Company, or because of any improprieties or any other matter relating to the Company's operations, policies or practices.
The Board appointed Richard Dole, who has been a director of Double Eagle since March 2005, as Chairman. As part of his responsibilities, Dole, on behalf of the Board, will coordinate company activities and management until a new CEO is selected.

The double loss in top management does not bode well for a company that has not displayed many positive financial aspects over the last few years. While the company recently had a favorable legal finding with regard to a lawsuit initiated by environmental organizations, the loss of its long time CEO and its CFO indicates there may not be great financial opportunities awaiting the company over the next few years.

Keep an eye on the interim management of the firm and the individual the company finds to replace Hollis as CEO.

For more:

CNN Money (more)
CNN Money
Trading Markets
Small Cap Investor

Friday, December 7, 2007

Recommended Reading - What are the challenges before new CEOs!

If you are about to be appointed a new CEO or you are interested in the challenges a new CEO must face when beginning his/her new position, check out Priyanka Sangani's piece in India's Economic Times. The piece is short but worth the read.

Thursday, December 6, 2007

Coca-Cola CEO To Step Down in 2008

In a surprise announcement, Neville Isdell will step down as CEO of Coca-Cola KO (NYSE) July 1. He will be succeeded by the company's president and chief operating officer, Muhtar Kent, 55. Isdell will remain as chairman until Coke's annual meeting in April 2009. Isdell has served as CEO since June 2004, a relatively short time frame for the soft drink manufacturer.

According to Harry Weber in an Associated Press story,

John Sicher, an industry expert and editor and publisher of Beverage Digest, said naming Kent as Isdell's successor is a positive move for Coca-Cola.

"He understands the company and the system literally as well as anybody in the world and better than most," Sicher said.

Sicher added, however, that business challenges lie ahead for Coca-Cola and Kent after Isdell steps down as CEO, particularly in the company's key North American market.

Muhtar Kent has been groomed as Isdell's successor. In a story by Mary Jane Credeur and Duane D. Stanford for Bloomberg when referring to Kent the reporters quoted Walter Gerasimowicz, chief executive officer of Meditron Asset Management, which has about 2.5 percent of its $1 billion in assets in Coca-Cola shares,
"He has a great deal of experience as a bottler and in the international markets, and that's very important to Coca-Cola.''
It appears Coca-Cola has shown the corporate world how to do a CEO succession. We will just have to wait and see how it all works out.

For more on the change see:

Businessweek blog
International Herald Tribune
Atlanta Journal Constitution
The Wall Street Journal
Financial Times

Wednesday, December 5, 2007

Recommended Reading - CEOs Who Should Go

Morgan House in a piece for The Motley Fool December 5 lists three CEOs that should go:

1. Angelo Mozilo, Countrywide Financial CFC (NYSE) already on my CEO Watch list.
2. James Tobin, Boston Scientific BSX (NYSE)
3. John Mackey, Whole Foods WFMI (NASDAQ)

For now, I would add Scott A. Edmonds, CEO of Chicos FAS CHS (NYSE). Chico's owns and operates specialty stores throughout the United States. The boutiques target middle-to-high-income women ages 25-40 with clothes made primarily from natural fabrics. The company's results have continued to perform poorly under Edmonds' leadership and now might be a good time to seek a change in leadership and strategic direction for the firm. In a story by Reuters
The company reported a 44 percent drop in third-quarter net profit on Tuesday and forecast weaker-than-expected results as sales continued to slump in November. The company's shares slid 8.7 percent in extended trading following the announcement, in which it also said it was scaling back its expansion plans for 2008.

"We are greatly disappointed with our performance to date," Chief Executive Scott Edmonds said in a statement. "Numerous challenges continue to affect the entire retail sector."

Third-quarter net profit fell to $23.6 million, or 13 cents per share, from $42.1 million, or 24 cents per share, a year earlier.
While retail has been under pressure, Edmonds has failed to demonstrate the leadership and the talent to right the company ship. Keep an eye on Chicos.

Tuesday, December 4, 2007

CEO Watch - Citigroup Update 1

If you think it is easy to fill the CEO position for one of the largest banks in the world, you may want to reconsider. The new CEO for Citigroup will have to sign off on the company's financial statement, something many of us might not be willing to do right now. According to a story in the Financial Times,
Josef Ackermann, chief executive of Deutsche Bank, has turned down an approach from Citigroup about taking charge of the US bank, underlining the lack of high-profile external candidates for the job.

Mr Ackermann was asked if he would be interested in becoming Citigroup’s chairman and chief executive following the resignation of Chuck Prince. He “was approached, but said he was not available”, according to someone familiar with the matter.
Who else out there has turned down the job? We will just have to wait and see. Many people continue to predict it will be current Citi employee Vikram Pandit. Stay tuned.

For more:

Forbes Blog
CNN Money