Recommended Reading - Citigroup Shares Plunged as Shareholders Suffered 'Figurehead'

Lisa Kassenaar wrote an insightful piece for Bloomberg (December 29th) that examined how corporate boards, even in the era of Sarbanes-Oxley, have often failed to live up to their responsibilities.   Kassenaar wrote,

As the credit crisis gripping the global economy stretches into a third year, corporate directors are facing a storm of scrutiny for the instances when they’ve failed to show up — to sound the alarm as imprudent investments piled up at Citigroup or Bear Stearns Cos., for example, or to right the strategy at General Motors Corp. as the company was losing touch with car buyers’ tastes and burning through cash…

… Nell Minow, who has been agitating for better corporate governance for two decades, says directors remain too friendly with their executives. Minow, who founded the Corporate Library, a research group in Portland, Maine, wants companies to make it easier to replace directors by giving shareholders a vote on every board member every year.

The gist of the piece is a battle remains between corporate governance advocates and shareholders versus executive management and boards.  Read the piece for yourself and make up your mind on what side you stand.  I remain in Minow’s corner.  It is likely the new Obama administration will implement new regulations upon boards and management that come closer to corporate governance advocates.

Recommended Reading - The CEOs You Don't Know, Forbes

Matthew Kirdahy wrote a piece in Forbes yesterday that examined a number of highly successful CEOs not generally covered by the financial press.  Kirdahy focused on eight CEOs:

John B. Hess, HessJohn B. Colson, Quanta Services  Robert Parkinson, Baxter International   David A. Smith,  PSS World Medical  Richard Leeds, Systemax  Paul Dykstra, Viad  Dean Foate, Plexus  William Sullivan, Agilent Technology  

The CEOs listed and their companies are worth a quick read.

Recommended Reading - The fallen giants of finance, Financial Times

Yesterday the Financial Times ran an interactive audio/video piece on the many financial CEOs that took it on the chain over the last year.  It's a sad piece but worth a quick look-see.

Recommended Reading - What Makes the Best CEOs? Mergers Can Help., Deal Journal

Heidi Moore wrote a piece in today’s Deal Journal in which she examined the assessment of a number of top CEOs for their management and deal making skills.  Moore’s piece focused on a number of other articles recently written by academics, her own colleagues at the Wall Street Journal and management gurus who have separately assessed a number of the top CEOs. Check out the story or least take a look at the CEOs mentioned.

Recommended Reading - Klause Kneale on Chief Executives, Forbes

Klaus Kneale has written a brief apologist piece in Forbes on chief executives and the particular problems they and their companies currently face.  According to Kneale,

The title of chief executive has become fraught with peril. All blame, no reward. Every chief executive, good or bad, is overpaid. (According to whom? Everyone, apparently.) Grabbing the reins of a distressed company will be a sure-fire way to get publicly villainized and possibly sued. Turnaround artists who are chief executive candidates will ask, “Can I have the same powers and responsibilities but a different job title?” No.  

Check out the short piece, it’s worth a quick read.  While I don’t personally agree with Kneale’s conclusions I have found it useful to read how he views their role.

Steve Jobs - Maybe he is not indispensable to Apple

The recent news from Apple that Steve Jobs has issued a last minute cancellation of his keynote at the upcoming MacWorld event stirred new speculation on his health and what it might mean to Apple.  Rather than explore Jobs’ health status for which I have nothing new to bring to the issue, the real question remains what it might mean for Apple should he leave.  While many people have viewed the loss of Steve Jobs as Apple’s CEO as near cataclysmic, Justin Scheck and Neal Wingfeld of the Wall Street Journal wrote a piece that was far more circumspect over the consequences of Jobs leaving the company.  According to the story,

What if that situation does change? There is reason for optimism, based on the evolution of the team that develops Apple’s hardware, software and services, some people familiar with the company’s internal workings say. Some of them believe the group is now strong enough that, barring an exodus of top talent, the company could keep churning out innovative products without Mr. Jobs.  

Mr. Jobs did not respond to a request for comment…. 

In one possible sign of confidence in the management team, an unprecedented number of executives presented during the company’s press event to unveil its new MacBook lineup in October, though Mr. Jobs still dominated the event. 

… Mr. Crow contends that Mr. Jobs has now hired or elevated enough people whose product vision mirrors his that the company could continue to thrive. Mr. Ive is particularly in tune with Mr. Jobs’s thinking, he notes. Mr. Jobs’s sensibilities are also so deeply ingrained in lower-ranking designers and engineers that “a lot of people there will say ‘gee, what would Steve think about this,’ when Steve really isn’t thinking about it,” Mr. Crow says. 

Rick Devine, an executive recruiter in Silicon Valley with Devine Capital Partners, thinks Apple could continue to thrive in a post-Jobs world, predicting that the company will depend more on execution in the coming years than the kind of radical reshaping Mr. Jobs engineered over the past decade. Mr. Devine helped recruit Tim Cook, now Apple’s chief operating officer, to the company more than a decade ago.

 The authors make a good case for further success at Apple even without Jobs as long as key management talent remain.  To get the full story check out the entire article.

For more:

GigaOm

Yahoo CEO Speculation Continues Unabated

Yahoo’s CEO guessing game to replace Jerry Yang continues unabated.  First it was Jon Miller of AOL, then Arun Sarin, former CEO of VodaPhone, and on and on.  According to Nicholas Carlson of Silicon Alley Insider the latest name to resurface is John Chapple, the former Nextel CEO and ally of Carl Icahn.   According to Carlson,

Everyone we’ve talked to recently is betting on former Nextel CEO John Chapple, who joined the board with Carl Icahn in August. 

Unless Yahoo/board has a potential deal in place, I am skeptical of Chapple’s chances for the position.  I anticipate a surprise appointment.  Stay tuned.  

For more:  

Bloomberg  

India.com  

All Things Digital Boomtown   

Silicon Alley Insider  

Barron's Tech Trader  

Recommended Reading - Good Riddance to the Imperial CEO, Business Week

I recently came across an October 28, video/text story from Business Week given by Professor Edward E. Lawler III from the Marshall School of Business at the University of Southern California.  Lawler recently published a book called Talent.  In the Business Week piece Lawler focuses specifically on the issue of leadership.  He takes to task so-called imperial CEOs.  In the story, Lawler refers to CEOs who,

… make decisions and develop strategies with little input and discussion. Their decisions are above criticism and challenge. They adopt lifestyles that make them celebrities, and their companies become vehicles that make them “rock stars.” They are supported by technology that is designed to keep them in touch 24/7. But in reality, most imperial CEOs are dangerously out of touch with the people they lead, particularly when it comes to the issue of strategy implementation and development. Often they don’t hear bad news until it is too late (witness today’s problems in financial firms).    

Strategies and business plans in human capital-centric organizations are likely to be successfully developed and implemented only if the individuals who have to implement them have had a say in crafting them. Even if a brilliant CEO or senior executive can craft a successful strategy without input, the issue of how it is going to be implemented remains. Without individuals throughout the organization having a say in what comprises the strategy and agreeing that it is the right one, it’s highly unlikely they will want to or be able to implement it.

While I am not in total agreement with Lawler’s assessment, anyone interested in the issue of executive leadership should at least listen to the brief video/audio Lawler presents on the Business Week site.  You might even want to read his book entitled, Talent: Making People Your Competitive Advantage. 

Recommended Reading - Carly Fiorina Op-ed in Wall Street Journal

Carly Fiorina, former chairman and CEO of Hewlett Packard, wrote an interesting editorial in today’s Wall Street Journal, entitled, Corporate Leadership and the Crisis, CEOs seeking bailout should be willing to resign.  According to Fiorina, 

In a fast-paced, hypercompetitive, technology-driven world, common sense, good judgment and ethics matter more than ever. The American people expect leaders to have sufficient wisdom and perspective to buck the crowd and defy conventional wisdom when necessary, even if it isn’t popular at the time. Quarterly earnings and share price cannot be the singular purpose of business or metric of success for CEOs. Shareholders are not the only constituency a CEO and board serve. Businesses have equally important obligations to employees and customers. A CEO’s job is to balance the competing requirements of all of these constituencies.  

Business has an important role to play in rebuilding confidence and restoring credibility. To strengthen accountability, boards should put all aspects of CEO pay up for shareholder vote on an annual basis. Clawback provisions, which require a CEO to return compensation to shareholders if promised results aren’t delivered following their departure, should be included. CEO pay should be based on a balanced scorecard that reflects customer satisfaction and investment in employees, in addition to achievement of financial goals

Every board seat should be voted on annually and board membership should be regularly refreshed to ensure that tough questions continue to be asked. And when CEOs go to Washington and ask for taxpayer money, they should also be prepared to submit their resignations and those of their boards. To earn a bailout, a CEO and board should be held accountable for the decisions they’ve made — or perhaps the actions they’ve failed to take.  

Fiorina, who I am not a fan of, has defined a number of proposals the new administration should take under advisement and consider implementing as we move further into the ongoing financial/credit crisis.  Please read her entire editorial, she has a number of very worthwhile ideas to consider.

Should Rick Wagoner, GM's CEO, stay or go?

Tuesday afternoon Mitch Albom, the writer and radio talk show host (760 WJR AM out of Detroit), interviewed Mark Phelan, a reporter for the Detroit Free Press, and myself on whether or not Rick Wagoner, General Motors’ CEO should be forced out.  The interview took place while the U.S. Congress was considering bailing out the Big Three.  I was in favor of Wagoner’s removal and have been for over one year while Mr. Phelan contended he should stay.  If interested, check out the debate.  

Recommended Reading - Rescue Memo to Vikram Pandit, NY Times Dealbook

Paul Pendergast, who writes under the name of Jack Flack, wrote a memo in today’s New York Times Dealbook entitled Rescue Memo to Vikram Pandit.  The memo is a worthwhile read outlining clever ideas on what Pandit needs to do to save his job.  According to the author,

… if you want to avoid hearing Gasparino (CNBC reporter) speculating on behalf of your critics every couple of weeks, you’ll need to make sure you manage perception as well as you manage reality. Unfortunately, you’re not particularly good at that, which is actually a common affliction among strong analytical thinkers like you. 

Flack goes on to outline a number of key areas Pandit needs to focus on:

Be yourself …, 

Stop not-apologizing …,  

Define the model …,  

Push a real purpose …,  

Steward publicly …,  

Forget internal …,  

Manage Bob…   

If you follow Citi or are interested in the plight of financial CEOs, the memo is a must read.

CEO Watch, Rick Wagoner, GM, Update 10

It has been close to one month since my last warning on the possibility that Rick Wagoner, GM's CEO,  may be forced (and I contend should) to take a permanent vacation from General Motors.  According to stories in the press the pressure increased on GM to force Wagoner out if the firm is to get a government bailout.  According to a story by Gregg Stoll and Greg Hitt in today's Wall Street Journal,

On Sunday, Sen. Christopher Dodd (D., Conn.), a supporter of emergency loans for Detroit, suggested Mr. Wagoner should go if the government follows through and provides billions of dollars to help the auto giant restructure and return to profitability.

"I think you've got to consider new leadership," the senator said on the CBS talk show "Face The Nation." A Dodd aide said later the senator's demand for change would not be a "condition written into the" rescue package coming together on Capitol Hill, and draft legislation prepared by top Democrats doesn't make that explicit requirement. But Mr. Dodd's displeasure was clear. "If you're going to restructure, you've got to bring in a new team to do this," he said. "I think [Mr. Wagoner] has to move on."

...In a statement, a GM spokesman said the company "appreciates" Sen. Dodd's comments but added GM's employees, dealers, suppliers and its Board of Directors "all support Rick Wagoner and are confident he is the person to lead GM through these difficult times."

But calls for Mr. Wagoner and others to step down appear to be growing. In a statement from his office Sunday, Sen. Charles Schumer (D., N.Y.), said that, "while it can't happen tomorrow because of the urgency of the companies' financial situation, I would like to see management changes as part of any restructuring."

On Sunday, Jerome B. York, an adviser to billionaire investor Kirk Kerkorian who served as a GM director in 2006 when Mr. Kerkorian owned a stake in the company, called publicly for sweeping change at GM.

"Aside from a failure of leadership at the most senior executive management level, GM has five long-serving directors who have been on the board 10 years or more," Mr. York said in a telephone interview. "They have approved of and overseen many of the moves that have contributed to the company's troubles. They should also resign."

We will just have to wait and see how this all plays out.  Unfortunately, it is very late in the game to be considering new management but at a minimum it's a start.  Of the big three Wagoner has to be the first to go.  Mulally at Ford has shown he understands the situation and has made a start at turning Ford around. 

For more:

Globe and Mail (12/10) AP Story

AP (NPR Marketplace)

Portfolio.com

Reuters

The Deal.com

Jalopnik

Auto News (video)

U.S. News and World Reports

Unemployment Soars as Executive Turnover Slows

Rex Nutting of MarketWatch reported today that according to a survey by outplacement firm Challenger, Gray & Christmas November layoffs were up 148% compared with a year earlier.  This dramatic number contrasts sharply with Liberum’s latest report on executive turnover numbers for November 2008.  Liberum found that executive turnover actually declined in November when compared with the same time frame in 2007.  CEO changes declined 32%, CFO changes declined 46%, all C-level changes (from board of directors down to VP level) declined 39% and board of director changes declined 39%.    

As corporations continue major layoffs of mid-managers and blue collar workers most executives running public corporations have so far managed to keep their positions of authority.  Liberum expects the surprising divergence in executive turnovers from what has been happening to general workers employed by corporations to shift as we move into the winter and spring months.  As the recession takes a greater bite out of the economy, shareholders and even corporate boards can be expected to rachet up the pressure on executives to improve their performance and that of their companies or face the loss of their jobs. We anticipate the level of executive turnovers will begin to increase in February.  

Recommended Reading - Boards Go Global, Buinsess week Management IQ blog

Jena McGregor wrote a fascinating piece on Business Week’s Management IQ blog yesterday on the growth of international members on corporate boards.  McGregor examines the issues surrounding the idea both pro and con.  She writes,

In an attempt to diversify, boards have long sought to add women or minorities to their ranks. But as U.S. markets slow and global revenues become more critical than ever, they’re increasingly seeking foreign members or directors with significant international know-how. “It’s an emerging area,” says National Association of Corporate Directors president Kenneth Daly. “There’s a lot of interest in foreign companies having U.S. directors as well as U.S. companies wanting foreign directors.” Bart Friedman, a partner with Cahill Gordon & Reindel, who advises boards on governance matters, says he sees the interest doubling each year. “I’m not aware of a board that hasn’t at least thought about the issue.”

The blog is very worthwhile read for anyone interested in the corporate boards and how they can be helpful to a company’s success.  Check it out.

For more:

Reuters

Recommended Reading - Putting a Value on a C.E.O., NY Times Dealbook

Andrew Ross Sorkin wrote a terrific column today in the New York Times Dealbook.  His piece provided a brief but incisive  overview of the issues surrounding the controversy over CEO pay and performance.  Sorkin starts off the column asking why Vikram Pandit, Citigroup’s embattled one year old CEO, should remain in his position.  According to Sorkin,

Many Americans, including many people on Wall Street, would argue that an executive with a record like that (referring to Pandit) should get paid little or nothing.  

The reference to Pandit related more to the problem than Pandit’s actual circumstances or his own opinion on what should take place with regard to Pandit.  In the piece Sorkin goes on to review what many of the specialists in the field think and what options exist for improving the problem.  If you are at all interested in executive compensation and performance check it out. 

Kara Swisher Examines Carl Icahn's Recent Acquisition of More Yahoo Shares

Kara Swisher in her Boom Town column for the The Wall Street Journal’s All Things Digital today examined the surprising news (or is it?) that activist investor Carl Icahn has actually increased his shares of Yahoo stock.  Swisher concludes Icahn, who according to recent regulatory filing just bought 6.7 million additional shares of Yahoo stock, must think a new CEO is getting ready to be appointed at the struggling firm.  According to Swisher,

… my guess is that the choice of a new CEO is likely to be sooner than later and much more Icahn-friendly. 

That could point more clearly to perhaps one of two execs whom Icahn brought with him to the Yahoo (YHOO) board–either former media exec Frank Biondi Jr. or, more likely, former Nextel exec John Chapple.

Another theory is that Yahoo will pick a more low-key, tech-oriented outsider, an operational star who can get things turned around at Yahoo without a lot of fuss, similar to choices made for eBay (EBAY) in its pick of John Donahoe and Mark Hurd at Hewlett-Packard (HP) recently.

  Swisher contends Icahn is looking for a way to make back some of his losses from his early purchases of Yahoo that have declined so deeply.  I tend to believe Yahoo will go with the low-key CEO approach appointment as discussed above in her last option.  This approach seems to make the most sense for a potential turnaround over time at Yahoo.  The other possible appointments seem too risky and fraught with problems.   

Keep a close eye on possible news coming from Yahoo over the next few weeks.

Recommended Reading - Michael Useem on the four key questions of leadership, Globe and Mail

Karl Moore, a reporter for Canada’s Globe and Mail’s Report on Business, recently interviewed Michael Useem, a senior professor and the director at The Center of Leadership and Change at the University of Pennsylvania’s Wharton School of Business.  Useem discusses the nature of leadership in today’s world.  His quick synopsis of the key elements of leadership is quite inciteful.  

Check it out either in video or text.

Rumor - Google's CEO, Eric Schmidt To Step Down?

Henry Blodget wrote a story in his Silicon Alley Insider suggesting the possibility that Eric Schmidt, the CEO of Google, might be stepping down.  The unconfirmed rumor is not all that far-fetched.  Check out Blodget’s piece and the original story that appeared in the Technology Media and Telecom (TMT) Analyst blog.  The rumor contends Schmidt will be joining the Obama adminstration.

Citi's CEO, Vikram Pandit Takes New Tack

Vikram Pandit, Citigroups's embattled CEO, appears to be taking a new tack in his attempt to stay at the top of the bank and find a way to help turn it around.  The self-effacing executive is going to do a brief stint on TV.  Tonight he will be on Charlie Rose.  According to a piece by Francisco Guerrera in last week’s Financial Times,

(Pandit’s) efforts to stay out of the limelight have been fruitless. Citi’s share price has disintegrated amid fears it will add billions of dollars in fresh losses to the $50bn-plus (£34bn, €40bn) in writedowns it has already suffered. This week the shares halved, putting the 51-year-old executive under huge pressure to save Citi, and himself, from a grim future, which could involve a fire-sale, a break-up, or even a government takeover.  

… Citi’s stunning decline has increased the scrutiny of Mr Pandit’s personality and management philosophy and raised questions over whether his methodical, technocratic style is what the company needs to survive. When asked to point out Mr Pandit’s most visible attributes, friends and foes point to his sharp mind and calm, professorial manner.

… Despite being a Wall Street star, Mr. Pandit steered clear of the glitzy trappings – golf, flashy cars, wines and cigars – craved by most bankers. He devotes most of his free time to Swati, his wife of over 20 years, and their two children. 

He has finally recognized that spreadsheets and analysis are just part of the game of managing.  It is a little late to be working on public relations but his decision to be interviewed on TV is a start.  I recommend readers check out the Charlie Rose interview, there actually might be some interesting insights. Could this be the beginning of a whole new approach for Pandit? 

For more:

NY Times DealBook 11/26

Reuters (update)

Portfolio.com (Felix Salmon)

Walmart defies market - then replaces CEO?

The world’s largest retailer, Walmart WMT (NYSE) who has managed to defy the ever widening worldwide slump in retail, announced today that its CEO since 1998, Lee Scott, will be stepping down and replaced by Mike Duke, the vice chairman of Wal-Mart International on February 1, 2009. Duke will immediately get a seat on the board. The surprise announcement comes as consumers have continued to shop at Walmart in the midst of possibly the worst recession in over fifty years. Walmart’s strategy for maintaining low prices has kept strapped consumers happy and abundant at their stores.

Scott, whose exit at this moment in time appears a bit odd, may have found a way to leave Walmart at the top of his game. Often times in the past he has served as a lightning rod for union and healthcare activists as well many others who have found fault with his management of the company. Another possible explanation might be a conflict with the chairman, Rob Walton. There is no way of telling. One thing for sure, unlike so many other large companies, Walmart has managed to put in place a succession plan that appears to make sense. Duke’s ascension to top has been praised by a number of retailing analysts and appears to make sense for the firm overall. In a Reuters story in the International Herald Tribune,

Analysts said the succession plan comes at a good time for Wal-Mart, which has lifted profits at the expense of rivals by persistently focusing on low prices.”I think it’s good. I’m happy to see it,” said Joseph Feldman, a retail analyst with Telsey Advisory Group in New York, of Duke, 58.

“It’s a little strange that Scott didn’t want to get through the holiday season” before announcing the transition, he said. “I don’t think it’s a sign that they’re going to have a lousy season.

“Feldman said that at the company’s analyst meeting in October, there was almost a sense Scott was saying farewell, and “finally had the upper hand over Wall Street.”

In a story by Chriss Burritt for Bloomberg there was more praise for Duke’s appointment.

“Duke seems to be the right pick,” Richard Hastings, a consumer strategist at Global Hunter Securities LLC of Newport, Beach, California. Internal promotions make sense, “especially those from the transport and logistics

side of the business, the center of the company’s extraordinary power and competitive advantage.”

As it appears right now, Walmart should serve as a good example for other large companies on how to execute succession planning. Stay tuned as the U.S. and world economy try to find a path out the financial and now economic quagmire. Walmart has so far found a clear path for moving forward.

For more:

Financial Times

Briefing.com

WWD

USA Today

Portfolio.com

NY Examiner

Recommended Reading - Citi: From Bad to Worse

Felix Salmon wrote a blog in Portfolio.com yesterday calling for a change at the top of Citi.  He does not believe Vikram Pandit, Citi’s CEO, is capable of handling the severe problems currently facing Citi.  In the blog Salmon wrote,

When Vikram Pandit became Citi’s CEO, he can hardly have expected to keep it if the share price fell to single digits. Now that it’s at $7, I think it’s time for Pandit to offer his resignation. The task facing Citigroup now is not to build a “global universal bank”; it’s to stay alive. And Pandit has given no indication he’s up to that particular job.  

Check it out.  

For more:

Finlay on Governance

CEO Savient Pharmaceuticals Resigns

Savient Pharmaceuticals SVNT (NASDAQ), the specialty pharmaceutical firm, announced the immediate resignation of its President and  CEO Christopher Clement.  Clement has been with the firm since 2002.  The company has appointed senior vice president Paul Hamelin as president.  According to the press release he will lead day-to-day operations of the company.  Clement leaves the firm as it is in its last step to get FDA approval for Puricase.  The drug, according to a June interview in the Wall Street Transcript with Stephan Patten, Portfolio Manager of Sector Asset Management, 

… is a treatment for gout, a treatment that is looking like it will be far and above better than every other gout treatment that exists today.  

The company had an additional press release today that announced a team of experts from the firm’s board of directors intended to assist in the FDA approval process and pre-launch of the drug if approved.  

Board of Directors has formed a BLA Oversight Committee (”the Committee”)to oversee the regulatory and pre-launch activities for the company’s drug, pegloticase, effective immediately. The Committee will be comprised of independent Board members Lee S. Simon, M.D. and Alan L. Heller, who both have extensive experience with the Food & Drug Administration (FDA) process. Dr. Simon will chair the Committee. The Committee will work closely with Savient officers, Dr. Robert Lamm and Dr. Zeb Horowitz, who will continue to lead the Company’s discussions with the FDA. 

The formation of the Committee followed Christopher Clement’s resignation as President, Chief Executive Officer and a director of the company, by mutual agreement between Mr. Clement and the Board. 

The company really needs this approval.  Pushing Clement out the door makes it appear Clement may have been an obstacle to the company’s efforts for approval and ultimate commercialization of Puricase.  Investors should keep a close eye on Savient and the FDA approval process for their new drug.    

For more:  

NJ Star Ledger 

Recommended reading - Meet your new leader - How the fallout from the financial crisis could breed a new type of corporate leader.

Jennifer Reinhold wrote a piece in Fortune that explores the possibility we are entering a new ear of CEOs. Reinhold examines a number of different academic studies and analyses that contend a new ear of CEO leadership is upon us.  According to the story,

… a new model is emerging. Collins (Jim Collins author of Good to Great) thinks that legislative, not executive, skills are now ascendant - that top CEOs will be those who are able to create the conditions for things to get done rather than hand down orders (as Hank Paulson learned, what worked at Goldman Sachs didn’t fly in Congress).

David Gergen, the political expert and director of the CPL at Harvard, agrees. “The CEO of the future is going to have to be someone who deals well with government,” he says. The truth is, these days a CEO cannot fully control his destiny in a world of competing entities, ranging from regulatory agencies to angry shareholders, from consumers to foreign powers.

The ability to look beyond the short term to the horizon and inspire employees is another must, given what looks like a prolonged economic slump. Xerox (XRX, Fortune 500)’s Anne Mulcahy, for example, has brought the company back from the brink by rallying her employees around the challenge itself rather than throwing money at them. At Home Depot (HD, Fortune 500), CEO Frank Blake accepted an annual pay package worth one-quarter of his predecessor’s, and he is also finding creative nonmonetary ways to motivate employees, including giving merit awards for great customer service and assigning store workers more decision-making power.  

There is a degree of truth to the article’s premise but do not expect visionary and imperial CEOs to disappear too quickly.  Anyone interested in executive leadership or growing trends in business should check out the Fortune piece. 

Yang Exits, What's Next for Yahoo?

The tumultuous year and a half tenure for Jerry Yang at Yahoo (Yhoo) NASDAQ is about to come to an end.  Yang,  a co-founder of the once formidable Internet and search company, returned to Yahoo in July 2007.  He returned in what many considered as the “white knight” to replace former CEO, Terry Semel.  Semel, who was not a technologist, had tried to expand Yahoo into a media company as a way to compete with its prime competitor Google.  Semel’s efforts had been failing and Yahoo continued to lag and fall further behind Google.  Expectations on Yang’s return and leadership also failed to turn out as hoped.  During Yang’s short-lived tenure the firm has only seen its fortunes continue to decline.  According to a piece in CNN,

Things only got worse for Yang, due to both his own and previous management missteps and also external forces, including a hostile takeover attempt by Microsoft (MSFT), which was followed by a proxy fight by activist shareholder Carl Icahn.     

Yahoo also saw its search business decline and its strong graphical ad business suffer in the midst of the current economic meltdown.

There has also been an exodus of major executives over the last year, along with recently announced layoffs of 10 percent of the company, which are set to take place December 10.

In addition, Yahoo’s controversial search ad with Google (GOOG) recently collapsed, and its talks to merge with Time Warner (TWX) online unit AOL have dragged on.  

Yahoo has initiated a CEO search with the help of executive search firm Heidrick and Struggles.  Many names are being bandied about as a possible successor to Yang.  A number of the names being suggested include a former Microsoft executive and current Microsoft executive who according to some analysts might help to increase the likelihood of a deal with Microsoft.  Two names being raised are Kevin Johnson and Brian McAndrews.  Johnson originally headed Microsoft’s first attempt to buy Yahoo.  He recently left Microsoft to become the CEO of Juniper Networks (see earlier blog).  It is difficult to imagine he would leave that position at this point to head up Yahoo.  McAndrews is with Microsoft and is currently SVP of the Advertising and Publishing Solutions Group.   Other individuals include Susan Decker, the current president of Yahoo and a close associate of Yang’s along with Peter Chernin of the News Corp., Jan Miller former AOL head, Meg Whitman former head of eBay and others. Whoever is chosen to replace Yang will be on the hot seat.    

My own guess is someone from the outside will be chosen and possibly a name not yet being floated.  It is nearly impossible to conceive of any successor who will be able to run Yahoo as an independent firm going forward.  Some kind of deal will need to be made.  For the moment, Microsoft will remain on the sidelines until a replacement for Yang is found.  Once this happens we will see whether Microsoft jumps back into the fray.  Stay tuned, this sure to be an interesting but bumpy ride.   

For more:  

MarketWatch

Wall Street Journal 

ZD Net  

Minyanville  

SeekingAlpha  

Silicon Valley/San Jose Business Journal 

Cnet (Yang Memo to staff)  

Silicon Alley Insider  

Deal.com  

El Paso Electric Finds New CEO

Back in February, El Paso Electric EE (NYSE) (see earlier blog) saw its CEO, Ershel Redd, leave his position after only serving a short time.  El Paso put in place an interim CEO, J. Frank Bates, the company’s EVP and COO.  It took the company nearly ten months to find a successor to Redd.  Yesterday the company announced the selection of David W. Stevens as El Paso’s new CEO.  Stevens has key experience in the business.  According to a story by Joann S. Lublin in the Wall Street Journal,

Stevens ran Cascade between April 2005 and its July 2007 takeover by MDU Resources Group Inc. Since the acquisition, he has consulted about energy-industry mergers and acquisitions from Austin, Texas.

Before joining Cascade, Mr. Stevens was a top executive for Southern Union Co., another natural-gas company. El Paso operates “in an area I know well,” he said in an interview. “It fits my historical and regulatory experience very well. 

“The entire El Paso board interviewed the incoming CEO and chose him unanimously, according to one person familiar with the situation. The board spent months seeking Mr. Redd’s replacement partly because his tenure was so brief, the informed person said.

 

El Paso may have taken a bit long to find the right candidate, yet it seems it has done a commendable job.  Stevens appears to be a very good fit for the position.  Both his relative youth and experience in the industry should serve him well in his new position.  While El Paso did not have a good quarter, Stevens with the help of the interim CEO, J. Frank Bates, who will become the company’s president and remain as COO could be a good team for the firm’s long term performance.Keep a close eye on the transition and any moves Stevens may put in place.  For more:  El Paso Times 

CEO Watch, Rick Wagoner, GM, Update 9

It is rare I find myself in agreement with Silicon Alley’s editor and chief, Henry Blodget.  Today, however, he wrote a short piece on what he believes should be required before the U.S. Government bails out GM.  According to Blodget one of many requirements he would insist on is,

(GM) Management and board gone as soon as strong replacements can be found… 

For all the requirements he lays out before a bailout check his blog piece on Clusterstock. 

For more:

Bloomberg (11/14)

Citi May Be Considering Replacing Chairman

According to the Wall Street Journal (sub req.) , who quoted unnamed sources, members of Citi’s C (NYSE) board are considering changing its chairman, Sir Win Bischoff.  According to the story,

The board wants closer oversight of the efforts of chief executive Vikram Pandit and his team…

 The Journal’s unnamed sources also speculated that Richard Parsons, chairman of Time Warner and a member of Citi’s board, is being considered as Bischoff’s replacement.  It would seem the bank could come up with a more judicious and appropriate candidate.  According to Felix Salmon on SeekingAlpha,

The one option being mulled right now — replacing Win Bischoff with Dick Parsons — is clearly taken straight from the deckchairs-on-the-Titanic playbook. Parsons, remember, is the man about whom Joe Nocera said that “all his professional life, he’s wanted to be seen as someone who never seems to break a sweat”. In any case, Bischoff isn’t the problem. The problem is that Vikram Pandit gave himself altogether too much time to get smaller, and then decided his best chance at salvation was to get bigger — by buying Wachovia. Now, it’s too late: the die has been cast. Will Citi buy Chevy Chase Bank? It really doesn’t make any difference either way.

While I do not find myself in complete agreement with Salmon’s overall sentiments, I do not find Parsons the right person for the challenge.  His allegiance to Pandit might actually serve as a hindrance to helping Pandit.  If the board replaces Sir Win they need to find someone who intends to go toe-to-toe with Pandit and his team. 

For more:  

The Deal.com (11/14 update)

Bloomberg

Biz Journal   

MarketWatch     

Words of Wisdom from Controversial Hedge Fund Activist

The Deal.com had a very informative piece today examining Philip Goldstein, the controversial head of hedge fund Bulldog Investors.  Goldstein was the keynote interview at the Deal’s M&A Outlook Conference 2009.  According to the piece by George White,

When speaking about the many failures of major financial companies, Goldstein had harsh words for boards of directors.   

“Instead of blaming the board of directors, [the SEC] blames the shorts. It’s an artificial imposition on the free market,” he said. “Why is the board of AIG still there? They’re basically destroying the company. These boards have laws that basically protect them no matter how badly they screw up. 

”Boards can destroy billions of dollars in value and walk away. Bear Stearns, Washington Mutual, it goes on and on. The real moral hazard is on the boards. These guys get all the upside and none of the downside,” Goldstein observed.”They want to run things when things are good, but when things are bad they’re gone.”

Goldstein appears to hit the nail on the head in his assessment of boards.  Shorting stocks is not the bogey man it has been made out to be.  Let’s start seeing boards live up to their responsibilities.  If they do, we can expect some real changes for the positive. 

Close the Hatches, Lower the Sails - Prologis Jettisons CEO and Cuts Expenses

Prologis PLD (NYSE), the global industrial REIT considered one of the largest warehouse developers, announced a number of dramatic changes to deal with the ever growing credit crisis and its impact on the company’s share price.  The company’s CEO and chairman since 2005, Jeffrey Schwartz, resigned his positions effectively immediately.  In his place, the company appointed Walter C. Rakowich, the current President and COO, the new CEO while lead trustee, Stephen L. Feinberg was slated to take over as chairman of the board.   In addition to the major management changes the company also announced it would reduce general and administrative expenditures by 20 to 25%.  The company further announced a reduction in its slated dividend.  These key changes come after the company’s share price, according to a story by John Spence of MarketWatch,

… fell by more than half so far in November…

…The REIT sector has been crushed this year on accelerating financial problems, combined with fears over a slowing economy and retail spending. Funding for commercial real estate has dried up during the credit crunch.

The appointment of Rackowich, an employee of the firm since 1999 when he first began as the company’s CFO, makes for an easier transition.  According to Lou Taylor, Deutsche Bank analyst, cited in the MarketWatch article,

We interpret the change as a difference of opinion about future strategy. The board must believe a halt of all construction is required,” …

We will just have to wait and see how Rackowich and Feinberg manage the situation for the firm going forward.  They have at least put in place a viable strategy to conserve capital and deal with the continuing credit crisis and growing recession. 

For more:  

Bloomberg  

Forbes  

Reuters  

Globest.com 

EasyBource 

Financial Week

AIG's Newest CEO in Trouble?

PEhub.com picks up a story in the Baltimore Sun in which the head of AIG’s newest CEO is called for.  According to the story, Maryland Congressman, Elijah E. Cummings,

… called yesterday for the resignation of American International Group’s top executive after news reports of another resort hotel event involving employees from the giant insurance firm.

Cummings has emerged as a prominent critic of AIG, which received a revised, $152 billion federal bailout package this week. The Maryland congressman was responding to a report by an Arizona television station that AIG executives participated in a recent training session for financial planners at a Phoenix resort.

AIG called the news accounts “misleading” and defended the conference as a legitimate business event for 150 independent financial planners. It said AIG’s expenses were “minimal” and that unnamed sponsors and the financial planners themselves paid 90 percent of the cost.

Edward Liddy, who was selected as AIG’s new CEO at the same time that the government bailout of AIG had been announced, finds himself in a tricky situation.  Appointed by the U.S. government (Hank Paulson) he is not yet at risk for his position but he needs to find a way to stay out the news for problems such as these.  AIG has far bigger fish to fry and cannot afford distractions of any kind.

CEO Watch - Mike Zafirovski, Nortel Networks

Nortel Networks NT (NYSE) , the struggling telecommunications equipment manufacturer just announced another round of employee layoffs.  According to Howard Solomon of Network World Canada,

(The company) will lay off another 1,300 employees and restructure its business to face an accelerated “sense of emergency” in worldwide plunge in customer spending. 

… Zafirovski said that starting Jan. 1, Nortel’s four divisions will be trimmed to three: Units that will create and sell carrier network products, metro Ethernet network products and enterprise products. The global services division that had existed will be split among the remaining three so each unit will be vertically integrated.

One of the more illuminating aspects of the cuts, which according to many analysts is too small and too late, is the fact that four key executives will be leaving.  Most of them came in under Zafirovski who had been hired back in 2005 to deal with the company’s troubles.  Nortel will see the departure of Lauren Flaherty, chief marketing officer, John Roese, chief technology officer, Dietmar Wendt, the global services president and Bill Nelson, the executive vice president for sales.   According to a story by Amy Thomson and Vivek Shankar of Bloomberg these four executives will depart as the,

Nortel has lost more than $4.5 billion since Chief Executive Officer Mike Zafirovski took over in 2005, pushing him to cut 18 percent of the workforce. Phone companies such as Sprint Nextel Corp. have curbed network upgrades to cope with subscriber defections. Others are shifting from Nortel’s older technology, seeking faster products from Cisco Systems Inc. and rivals. 

 What’s even more troublesome is the fact according to Lilly Peel of the Times Online,

Nortel Networks Corp reported it biggest loss in seven years… 

It is difficult to see how Zafirovski will have the ability and the confidence of shareholders to permit him to continue much longer in his efforts to try and turn the company around.   Nortel like Alcatel-Lucent and many other telecom equipment manufacturers are fighting an uphill battle.  There is nothing about Zafirovski’s plans or previous actions that can instill confidence that he has what is necessary to keep the Nortel ship afloat as it continues to move through troubled waters. Stay tuned.  

For more:  

The Globe and Mail  

Seeking Alpha 

theStar.com

Financial Post

Recommended reading - Optimistic activists, The Deal.com

Ron Orol of the Deal.com wrote a clever piece today entitled Optimistic activists.  The article focuses on how certain activist investors have been approaching today’s difficult market.  In the story, Orol focused on the importance of management and how they plan to deal with it.  Below is a brief snippet of the story,

Companies with weak management are attracting activists seeking to change boards and executives, focusing on profit and loss statements rather than cash on the balance sheets that can be handed to investors. Bulldog Investors’ Phillip Goldstein expects that trend to continue in the coming months, as CEOs are no longer able to hide behind improving share prices. “One group has so far escaped unscathed — boards of directors, the very people responsible for these financial problems,” says Goldstein. “There is too much collegiality on boards, not enough skepticism.”

 Anyone interested in management and how it might be impacted by activist investors should check the piece out.

October CEO/CFO Turnovers Remain Surprisingly Slow

According to Liberum Research's latest management change figures, executive turnover continues to remain tepid while nationwide unemployment grows at a steady and unsettling pace. Despite the continuing slowdown in key executive turnovers over the last number of months, October was characterized by an unusually large number of what Liberum deems "significant" CEO turnovers. Significant turnovers are management changes investors should take note of and investigate further. 

Below is a graphical representation of CEO and CFO changes by market cap for the month of October. (For the specific executive turnover numbers by sector, contact Liberum directly.)

Is JDS Uniphase Losing CEO for Brighter Horizons or His Management Failings?

JDS Uniphase JDSU (NASDAQ), the laser and optical fiber component maker, announced during a conference call on October 29th its CEO, Kevin Kennedy, will be resigning his position.  Kennedy is leaving JDS Uniphase after five years at the helm of the firm to become the new CEO of Avaya, Inc. in January 2009.  Kennedy’s announced resignation comes as JDS continues to face slowing profits and a prediction by the firm that its sales for the second quarter that end in December are expected to be well below analysts forecasts.  Kennedy leaves the firm according to a story in Fierce Telecom,

… as JDSU is planning to cut 400 employee and contractor positions, as well as reduce its number of manufacturing locations from 19 to 12.

 Kennedy’s exit also comes as the company stock according to a story by Bert Hill of the Ottawa Citizen,

... plunged 61 per cent in the last year.

 It is difficult to determine what Kennedy succeeded in doing for JDS over the last year.  Kennedy himself was quoted saying (read Lightwave article),

“My decision to leave JDSU reflects the convergence of a unique opportunity presenting itself as well as my confidence in the JDSU leadership team that is in place to execute the initiatives now underway which should result in best in class operating metrics,” Kennedy was quoted as saying in an announcement. “I look forward to continuing to work with the team as a member of the board of directors.”  

 JDS finds itself in a difficult situation. Keep a very close eye on who the board puts in charge and who it ultimately finds to replace Kennedy.  It is hard to determine whether he is leaving a sinking ship or just jumping ship for a far better opportunity.Time will tell.

For more:

Barron’s Tech Trader (2007)

Marketwatch 

GigaOm

Earlier scandal and Operational Difficulties Finally Lead to CEO Exit

MF Global Ltd. MF (NYSE), the futures and options brokerage firm, announced today that CEO Kevin Davis resigned from his position as CEO and board member effective immediately.  Davis had been with the firm for seventeen years.   Back in February of this year the company made public a rogue trading scandal within the company.  According to a story by Stephanie Baum of Dow Jones’ Financial News dated February 28, 2008,

Evan Dooley, who worked at the Memphis branch office (MF Global) in the US, was discovered working in wheat futures via the Chicago Board of Trade at a level that “substantially exceeded his authorized trading limit.” MF Global terminated Dooley shortly after the discovery. 

The company’s share price fell 27.6% at the close of trade to $21.19 on Thursday. Its share price fell a further 19.7% on Friday to $17 as of 1:54 pm EST. When the company went public this past July, its opening share price was $31. 

In addition, Standard & Poor’s Rating Services and Moody’s Investors Service cut the broker’s credit rating on Friday. S&P lowered its long-term counterparty credit rating to BBB from BBB+. Moody’s lowered its long-term credit rating to Baa1 from A3. 

From that point onward the company has been struggling.  According to a story by Kevin Kingsbury in the Wall Street Journal,

Shares of MF Global have lost 93% of their value this year, including 48% this month alone, following a rogue trading scandal that wiped out the prior year’s earnings, raised concerns about its risk-management policies and triggered a dilutive refinancing with private equity firm J.C. Flowers & Co. LLC in May.

With the announcement of Davis’ resignation the company appointed current president and chief operating officer Bernard Dan as his replacement.  Dan joined the firm back in June.  Prior to his appointment, Dan had led the Chicago Board of Trade (CBOT).  Last year the CBOT was acquired by the CME Group Inc.  Dan was the CBOT’s president and CEO for close to five years prior to the acquisition.    Dan has come in to stabilize the firm.  We will just have to wait and see how the changes play out and exactly what Dan can do to turn the firm around.  It will be a tough road.  

For more: 

Forbes  

Marketwatch  

Reuters  

Seeking Alpha (June 2008)   

CEO Watch - Rick Wagoner, General Motors Update 8

Speculation is beginning to arise about the fate of Rick Wagoner as GM's CEO should a deal be made with Chrysler/Cerberus.  While the chances for a deal between the two car companies still seem a bit remote, should it happen, would Wagoner remain CEO?  I would doubt it.  

Earlier today a piece in Bloggingstocks.com speculated on a number of possible choices who would come from Cerberus.  While I am skeptical of the choices listed, I do think a deal would necessitate the need for a new CEO excluding both Wagoner of GM and Nardelli of Chrysler.

Stay tuned.

Update to New CEO, Cadence Design Systems

Cadence Design Systems CDNS (NASDAQ) which had a major CEO change earlier in the month (see earlier blog) according to CFO.com announced it,

is restating its financial restatements for the first two quarters of 2008 to correct $24 million in revenue recognition errors. It is also reviewing how customer contracts signed during the first quarter were recognized instead over the duration of the contracts, beginning with the second quarter. 

The announcement could not come at a more difficult time.  With a new CEO in charge along with other key managers the company must now focus on this issue.  According to the CFO.com article,

Cadence is hardly the only software maker to get snagged by revenue recognition issues. And although it seems too early to say if there’s any relation between the current company issues and broader industry problems, software makers have been struggling with the accounting rules for years over the booking of sales. 

Keep a close eye on when the company manages to put out its stalled third quarter earnings and how it deals with this latest difficulty. 

CEO Watch List - Jonathan Schwartz, Sun Microsystems

For sometime I have been considering including Sun Microsystems’ SUN (NASDAQ) CEO, Jonathan Schwartz, on my CEO Watch list.  Schwartz was appointed CEO back in 2006.  While I have long admired his intelligence and creative thinking the company’s overall performance under his tutelage has not faired all that well.  For a long time, I thought he would ultimately find a path to success for the firm.  Recent events, however, have forced me to include Schwartz on my CEO Watch list.   First there was the company’s latest performance results.  According to Therese Poletti of MarketWatch,

On Tuesday, the systems and software maker gave Wall Street a nasty surprise with the news that it expects to report a worse-than-expected loss in the fiscal first quarter. It is also conducting an internal “impairment analysis” because some its business units may be now worth less than their carrying value. 

 Poletti went on in the article to say,

It is time for Schwartz to make some serious changes at the beleaguered company, or it is going to continue in its downward spiral, in the same manner as ghosts from tech’s past, such as Digital Equipment Corp. 

Second, the company’s troubled performance has been seriously complicated by its largest shareholder, O. Mason Hawkins the CEO of Southeastern Asset Management.  Southeastern Asset yesterday disclosed it holds just over 21% stake in Sun. Hawkins has begun to squeeze the vise around Schwartz.  Hawkins is pushing hard for Sun to make changes to increase shareholder value.  They recently shifted their SEC filing from a 13G to 13D.  The change indicates Southeastern will no longer sit by passively but will continue to pressure management for changes.The proverbial third shoe fell today.  The co-founder of the firm, Andy Bechtelsheim, who returned to the firm four years ago, announced today he would be leaving Sun.  According to a story in Business Week,

(He will leave Sun) to become chairman and chief development officer at Arista Networks, a startup he has funded that sells a powerful network switch for data centers, and whose customer list includes Google (GOOG). Arista’s CEO is Jayshree Ullal, who left Cisco Systems (CSCO) in May after 15 years at the company, and who had worked on some of the company’s key products. 

 

The departure of Sun’s star engineer, who had spearheaded development of a new line of more affordable products the company is pushing, comes as Sun’s sales slump and investors grow impatient with the company’s turnaround plans.

Numerous analysts are predicting a possible sale of the company or parts or a management change.  The problems facing Sun at this point in time make it likely that Schwartz may find himself out of his CEO position if he can not found a solution to the company’s ongoing difficulties. Stay tuned. 

For more:

Deal Journal 

Forbes  

TheStreet.com