Management Turnover as Change Agent

Friday, November 28, 2008

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.

Wednesday, November 26, 2008

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.

Tuesday, November 25, 2008

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) (Felix Salmon)

Friday, November 21, 2008

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 chairmanLee Scott 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 loBigChartsw 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
Mike Duke
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


USA Today

NY Examiner

Thursday, November 20, 2008

Recommended Reading - Citi: From Bad to Worse

Felix Salmon wrote a blog in 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

Wednesday, November 19, 2008

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 seniorChristopher Clement 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 SeSavient Pharmaceuticals one Year Stock Performancector 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. 

Tuesday, November 18, 2008

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 Jerry Yangthe “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 firmYahoo One Year Stock Performance, Source: BigCharts 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:  


Wall Street Journal 

ZD Net  



Silicon Valley/San Jose Business Journal 

Cnet (Yang Memo to staff)  

Silicon Alley Insider  

Friday, November 14, 2008

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 annEl Paso electric One Year Stock Performance, Source: BigChartsounced 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 

Thursday, November 13, 2008

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 (11/14 update)


Biz Journal   


Wednesday, November 12, 2008

Words of Wisdom from Controversial Hedge Fund Activist

The 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 placJeffrey H. Schwartze, 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 thPrologis One Year Share Price Chart, Source BigCharts.come 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.Walter C. Rackowich

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:  





Financial Week

AIG's Newest CEO in Trouble? 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.

Monday, November 10, 2008

CEO Watch - Mike Zafirovski, Nortel Networks

Nortel Networks NT (NYSE) , the struggling telecommunications equipment manufacturer just announced another rounMike Zavirovski, Nortel CEOd 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 NelsoNortel One Year Share Performance (Source BigCharts)n, 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

Financial Post

Tuesday, November 4, 2008

Recommended reading - Optimistic activists, The

Ron Orol of the 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.)

October 2008 Breakdown of CEO Changes By Market Cap Categories -

October 2008 Breakdown of CFO Turnovers By Market Cap Categories -