Management Turnover as Change Agent

Tuesday, September 23, 2008

CEO Watch - Philip Schoonover, Circuit City, Update 5

Nothing really surprising about the news yesterday that Circuit City CC (NYSE) CEO, Philip Schoonover was finally out.  The troubled electronics retailer and its CEO have been under intense pressure for sometime now.  Many analysts and others (see earlier blog) have been predicting his demise for more than a year.  Schoonover resigned yesterday in the midst of a proxy fight.  His resignation appears to be a victory by activist investor Mark Wattles (owns nearly 6.5% of the firm) who has been seeking a solution for the firm's continuing struggles. The real question is whether or not Wattle's success in finally getting Schoonover out as CEO will ultimately be just a pyrrhic victory.

The board named James Marcom, a current member of the board, as the acting president and CEO.  He joined the board back in June.  He is an ally of Wattles and was originally nominated by Wattles to become a member of the board.  The board also appointed Allen B. King as the new chairman.  According to a story by Ylan Q. Mui of the Washington Post,
Marcum has held executive roles at two of Wattles' ventures, retailer Ultimate Electronics and Hollywood Entertainment video rental.
The company is probably still looking to be sold.  In a Business Week story back in June, Wattles was quoted as saying,
... he wants the company sold as soon as possible.
We will just have to see what Marcom does.  I can not see a scenario right now where the company could be sold.  According to the same Business Week story,
Whether Marcum decides to sell the company or turn it around, he has his work cut out. He's taking over amid a contracting economy and credit crunch, when retailers are filing for bankruptcy left and right. "There's deceleration in all key consumer electronic products," says Andy Hargreaves, an analyst at investment bank Pacific Crest Securities in Portland, Ore. "With all these headwinds, Marcum doesn't have an easy job."
Schoonover over his two year tenure as CEO of Circuit City made a series of management blunders that ultimately may be impossible to come back from.  This is one situation investors should pay close attention to.

For more:

Information Week

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