Management Turnover as Change Agent

Tuesday, March 31, 2009

CEO Watch - Ken Lewis, Bank of America, Update #4

The ratchet continues to turn a notch on Bank of America CEO, Ken Lewis. According to an analysis by Elinor Comley of Reuters,

The government may now add to the pressure from shareholders, analysts said. The sudden departure of Wagoner after nine years in the top job at GM signals the Obama administration is looking for management changes at bailed-out companies.

“His longevity in the job is probably very much in question,” said Keith Wirtz, chief investment officer of Fifth Third Asset Management and a former CIO at a Bank of America subsidiary. Fifth Third holds shares in the bank.

The bank disagreed with the assessment. “We do not see the parallel with the U.S. auto industry,” said a Bank of America spokesman, noting that since 1991 the bank has been profitable in every quarter except one, and made a $4 billion profit in 2008.

Still, shareholders say Lewis is in a precarious situation, citing both the government bailout as well as the fourth-quarter losses at Merrill, which suggest Bank of America did not perform adequate due diligence.

Lewis’ time as CEO of Bank of America may finally be coming to an end. As the pressure continues to grow, Lewis and the board will find it more and more difficult to justify his position as CEO. Keep a close eye on B of A.

For more:

The Plum Line

The Washington Post

Monday, March 30, 2009

Recommended Reading - Chairman-CEO Split Gains Allies, WSJ

Joanne Lublin of the Wall Street Journal wrote a piece examining the growing acceptance of the need for splitting the corprate chairman and CEO positions. Lublin discusses a recent report,

… prepared by the Millstein Center for Corporate Governance and Performance at Yale University’s School of Management, the Chairmen’s Forum proposes that companies appoint a separate chairman after an incumbent CEO-chairman leaves — or explain why not to shareholders. The group is considering asking the New York Stock Exchange and Nasdaq to adopt listing rules that would require separate chairmen.

More U.S. companies are dividing the roles, but the trend is spreading slowly because many CEOs resist sharing power. About 37% of companies in the Standard & Poor’s 500-stock index have separate chairmen and CEOs, up from 22% in 2002, according to the Corporate Library, a research firm in Portland, Maine.

I would expect this trend will grow as the economy comes under increasing government regulation. Check out the story.

Sunday, March 29, 2009

It's Official, Rick Wagoner, GM CEO Resigns

General Motors’ board and shareholders have for too long time failed to get Rick Wagoner to resign as its CEO and chairman but the Obama Rick WagonerAdministration appears to have had the final say. Just prior to the Obama Administration’s newest announcement on what it intends to do with the American Automobile Industry planned for Monday news has come out that Wagoner will resign. According to a story by Justin Hyde and Tim Higgins of the Detroit Free Press,

President Barack Obama’s rescue plan for Detroit automakers will be unveiled Monday, but one condition became clear today: the resignation of General Motors Corp. Chairman and Chief Executive Rick Wagoner.

As a condition for additional government aid to GM, the Obama administration asked Wagoner to step aside, which Wagoner agreed to do today, people familiar with the plan said. Wagoner’s move, effective immediately, ends a 31-year career with GM.

…. It was not clear who would replace Wagoner; chief operating officer Fritz Henderson would appear to be the most likely candidate. GM declined to comment.

We are certain many auto analysts will assert that the CEO change right now is a mistake. I fail to agree. While it is very late in the game for this change, it is about time. I have been calling for resignation for a long time. Wagoner has shown throughout his career a keen understanding of the overall auto industry but he has failed miserably over the last five years to turn GM in a proper direction and deserves to leave. Let’s all hope the White House has a handle on what they might be able to do to save the industry and its hundreds of thousands and even possibly millions of auto-related jobs.

Stay tuned as we continue to follow this story and the travails of the American auto industry.

For more:

NY Times

City News

Mercury News


Globe and Mail 3/30

Wall Street Journal 3/30

Friday, March 27, 2009

CEO Watch - Ken Lewis, Bank of America, Update #3 (Revision)

Contrary to earlier comments by Ken Lewis in my blog below Lizzie O’leary and Christine Harper of Bloomberg this afternoon reported,

he (Lewis ) doesn’t advocate a legal division of commercial and investment banking and that his comments about separating the two referred to rhetoric and public perception.

Lewis continues to stumble even when he is trying to improve his image with the public. What’s next on his agenda?

CEO Watch - Ken Lewis, Bank of America, Update #3

Henry Blodget wrote a piece for Clusterstock today that questions (as I have been doing for quite some time) why Ken Lewis continues to remain as the CEO of Bank of America. Blodget stated,

Ken Lewis may be an excellent banker. He may be the pillar of his community. He may be a kind, considerate, Ken Lewisand fair boss who is admired by his troops. He may, generally, be a real asset to his company.

But Ken Lewis just screwed up. Massively.

Ken Lewis screwed up so massively that he single-handedly demolished at least half of the value his shareholders’ spent decades accumulating–through a knee-jerk decision to buy the sinking super-tanker known as Merrill Lynch. Six months ago, in one tense weekend, Ken Lewis let himself get duped into thinking that if he didn’t bid now and bid high for an imploding Merrill Lynch, he’d lose the prize he’d had his eyes on for years.

Lewis continues to have the “confidence” of his board which seems to defy reality. He continues to try and redeem himself in the eyes of the public. Today, before meeting with President Obama, he was quoted by Bloomberg making what appears to be a valuable suggestion. Lewis stated,

… the U.S. should consider separating commercial lenders from investment banking activities.

While he is probably correct his suggestion is not enough to give him a pass on the damaged he overseen to BofA. Stay tuned.

Thursday, March 26, 2009

Recommended Reading - Let us Prey, Globe and Mail

Sinclair Stewart wrote an irreverent piece for Toronto’s Globe and Mail entitled, Let us Prey, Wall Street’s recklessness has toppled the most exalted occupation in the land. Get Ready CEOs for a new job description. According to Stewart the celebrity CEO may be a dying breed. Judge for yourself, read the piece

Tuesday, March 24, 2009

Recommended Reading - Kings of the Jungle, Barron's

Barron’s recently put out its annual list of the 30 most respected CEOs worldwide. This year’s list saw a number of changes from the previous year both in terms of additions and deletions. Many of the names that left the list saw their career fortunes take a turn for the worse, e.g., Sir Fred Goodwin of The Royal Bank of Scotland and Jeffrey Immelt of General Electric. The list is fun reading.

CEO Salaries - A New Trend in The Making?

As public rage begins to boil over with regard to taxpayer financed bonuses and the level of CEO salaries, particularly in the finance-related sectors, CEOs outside the finance related sectoir are beginning to take heed. Just today, Philip Boroff wrote a piece for Bloomberg discussing William F. Ruprecht, the CEO of Sotheby’ s. According to the story,

(Ruprecht) agreed to a 14 percent pay cut and the elimination of his cash bonus after profit plunged and the auction house fired workers.

Ruprecht asked the board to cut his $700,000 base salary by $100,000, or 14 percent, according to a statement the New York- based company filed to the Securities and Exchange Commission yesterday. The auction house also removed his cash bonus for 2008, which was $2.6 million in 2007.

Boroff went on to discuss other high level CEOs, Glenn Murphy of the GAP, Inc. and Craig Dubow of Gannett who have already agreed to a cut in their compensation. While these examples are far from a trend they may represent a shift in thinking on the parts of corporate boards and even CEOs who must face shareholders and the public during this difficult economic time period. We will just have to see what transpires with regard tyo compensation for top executives over the next six to nine months. Stay tuned.

For more:



Business Week Management IQ

Globe and Mail

Friday, March 13, 2009

Could AOL/Time warner Be on to Something?

Yesterday’s announcement that AOL is replacing its CEO, Randy Falco and COO, Ron Grant, after a transition period is no real surprise. Speculation about this change has been rampant for some time. The real issue revolves around the annRandy Falcoouncement that AOL snagged Tim Armstrong, Google’s head of ad sales to become chairman and CEO of AOL. Armstrong has been with Google virtually from the beginning. AOL obviously hopes he will be a game changer for the firm. It is hard to see besides the possibility that he relishes a sisyphean challenge what Armstrong sees in his new position. AOL is in need of so much change even a player with the talents of Armstrong faces a real uphill struggle to make AOL a going concern again.Tim Armstrong

Time Warner intends to spin off AOL at some point, they have already made that known. While I am very impressed with the fact that AOL snagged such a powerhouse as Armstrong, I remain skeptical about what even he can do. For the moment the selection is a positive for AOL and Time Warner but long term it will be tough slogging ahead.

Stay tuned this is going to be very interesting.

For more:

Wall Street Journal



Ad Week



Wednesday, March 11, 2009

Recommended Reading - Hiring a New CEO? Go Outside the Company

Klaus Kneale wrote a fascinating piece in Forbes yesterday entitled, Hiring a New CEO? Go Outside the Company. Kneale’s piece refers to a study conducted by Vell Executive Search. The firm located in New England performed a study that,

looked at 51 CEOs and their companies’ revenue growth, focusing on publicly owned technology outfits based in New England with $100 million or more in annual revenues.

Externally hired CEOs at companies with over $1 billion in revenue brought in a median three-year revenue growth of 99%; their internally promoted counterparts achieved only 35% growth. Founders, which were concentrated in smaller companies, outperformed both of these groups.

The study raised a number of very important points about CEO succession but its overall conclusion, while worth serious consideration, does not adequately answer the real questions typically surrounding the efforts and goals behind finding a CEO replacement for a company. Each business circumstance is different, whether it is for a technology related company, a food company or other type of company and the CEO search must be dealt with in a manner capable of meeting a specific company’s goals and immediate needs. The study sample of 51 companies appears to have been far too small to make any sweeping conclusions.

Determine for yourself the applicability of the Vell study, read Klaus Kneale’s Forbes piece.

Tuesday, March 10, 2009

Recommended Reading - Exclusive: CEO bonus are falling fast: Study, Reuters

Even CEO’s are no longer immune to the economy’s troubles. According to a story by Martha Graybow for Reuters, Equilar the compensation consulting firm recently found,

… annual bonuses for U.S. chief executives shrinking…

The article is worth a quick read.

Monday, March 9, 2009

P and G Succession Plans May have Clarified

Early today Susan Arnold, the president of Proctor & Gamble Corporation’s (P&G) global business units announced she would retire effective September 1. Arnold actually stepped down from her position today and until her retirement will be working oSusan Arnoldn special assignement to P&G’s CEO. A.G. Lafley.

Arnold, who as been considered one of the most powerful business women in the world, has since 2007 been considered a potential contender for P&G’s CEO job should its highly regarded CEO, A.G. Lafley decide to retire. Lafley has continued to consistently state he has no intention of resigning in the forseeable future (check earlier blog). Lafley is currently 61 years of age and manadatory retirement at P&G is 65. Arnold along with P&G’s chief operating officer Robert A. McDonald who are both 55 years of age have been touted by analysts as the two top contenders for Lafley’s position.

Arnold’s announced resignation has put McDonald at the front of the pack as Lafley’s ultimate successor. According tRobert A. McDonaldo the Cincinatti Inquirer,

Her imminent departure appears to clear up the succession picture, leaving Chief Operating Officer Robert McDonald as the leading candidate to take over for Lafley. P&G historically picks a CEO from its executive ranks.

Despite all the denials by the firm, the question remains was Arnold pushed, and if so, does she expect at some point to take another position somewhere else? According to a story by Lisa Blank Fasig in the St. Louis Business Journal P&G’s spokesman Paul Fox said,

… it was Arnold’s longtime intention to retire when she turned 55, which she did on March 8.

Fox also said that Arnold ” has no plans to join another company at this time.” But she will continue to serve on the boards of the Walt Disney Co., McDonald’s, Catalyst and Save the Children.

The article went on to state,

In recent months, analysts have wondered if Arnold has fallen from favor with P&G because of struggles within the beauty care business, and particularly with the Pantene brand. Fox said such events played no role in her retirement.

I would recommend followers of Arnold’s career or people interested in qualified CEO possiblilities for top firms keep a close eye on Arnold for the next two years. We may see her unexpectedly pop up for a top position at some other top firm in the future.

For more:

The Western Star

Med City News



Advertising Age

Fortune Postcards

Friday, March 6, 2009

U.S. unemployment Jumps to 8.1% While Executive Turnover Remains Slow

The bad numbers continue unabated.  Today the United States Labor Department’s Bureau of Labor Statistics (BLS)announced the latest unemployment figures and they were not comforting.  According to the BLS,

Nonfarm payroll employment continued to fall sharply in February (-651,000), and the unemployment rate rose from 7.6 to 8.1 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today.  Payroll employ-ment has declined by 2.6 million in the past 4 months.  In February, job losses were large and widespread across nearly all major industry sectors. The latest unemployment of 8.1 percent came close to matching the rate back in 1983 which had been the worst recession since the Great Depression.         

These terrible unemployment figures have not been matched when compared with the turnover figures tracked by Liberum for top executives.  Liberum’s 2009 February executive turnover totals have remained low, particularly when compared to the same figures registered in February 2008.    

February 2009 CEO turnover declined 41%, CFO turnover declined 38%, C-level (defined by Liberum as board of director all the way down to VP level) turnover declined 41% and board of director changes declined 37% as compared with February 2008 numbers.       

Liberum has also broken February’s CEO and CFO turnover totals down into market cap categories.  Here too, the number changes have been very small particularly for the larger market cap firms.  Part of the reduction for the largest market cap firms can be attributed to the fact that so many blue chip companies no longer meet the large cap figures of the past but that is just part of the story.  Executives continue to focus their efforts right now on reducing company costs, production and employee levels.  As a general rule, the executives themselves, despite a number of very high profile executive changes, have managed to remain immune from being laid-off.  Below find two charts outlining the market cap related changes for CEOs and CFOs for the month of February.

   February 2009 Breakdown of CEO Changes By Market Cap Categories -


 February 2009 Breakdown of CFO Turnovers By Market Cap Categories -

 Liberum expects executive turnover to begin rising in March and through the spring.   Hopefully that will not be the case for general employment but it is likely the unemployment trend upward will continue for a number of months.

Thursday, March 5, 2009

CEO Watch - Ken Lewis, Bank of America, Update 2

Ken Lewis, Bank of America’s BAC (NYSE) embattled CEO, found himself today under added new pressure.  CTW Investment Group which works with Union-affiliated pension funds just wrote a letter to the bank calling for Lewis’ ouster.  The text of the letter appeared in today’s Charlotte Business Observer.  CTW has often been a thorn in the back of top executives perceived as failing in their executive duties.  According to a Reuters story CTW said,

if Lewis is not removed, shareholders should vote against the reelection of Lewis, Sloan and corporate governance committee chair Thomas Ryan to the board. Ryan is chief executive of CVS Caremark Corp (CVS.N).

Bank of America’s annual meeting is scheduled for April 29…

The real question remains what could a replacement for Lewis do at this point?  Stay tuned.  

For more:  

Charlotte Business Journal   


Wednesday, March 4, 2009

Recommended Reading - The Smart Execs Leave Before The Fall, TechCrunch

TechCrunch’s Michael Arrington wrote a brief blog today examining what executive exodus’ might mean for a company. He points out,

When a smart, ambitious executive who isn’t the CEO leaves a company, it isn’t necessarily a sign of trouble…

…But when bunches of them leave, watch out. With obvious exceptions, like a sale that results in a lot of liquidity being sloshed around the founder ranks, fleeing talent is an indication that a company is about to go sideways, or worse. There’s a reason why most of Yahoo’s executive talent bailed out in 2007 and 2008. And that’s just a high profile example… 

I refer to this article because it specifically reaffirms a conviction Liberum Research maintains on the importance of monitoring executive changes at companies.  Arrington wrote this piece as a direct consequence of news that a number of top executives were leaving MySpace to start a new company.    The real significance of the story is the importance that management change could mean for a company.  Check it out for yourself. 

Monday, March 2, 2009

Recommended Reading - Citigroup's Last Best Hope, The Daily Beast

William D. Cohan, a former M&A banker and well known business writer, wrote a clever blog piece entitled Citigroup’s Last Best Hope that appeared in today’s Daily Beast.  Cohan makes the argument that Citi’s new Chairman Richard Parsons does not as many people suggest have a monumental task ahead in choosing new independent members for Citigroup’s board.  Citi as part of its deal for more government funds agreed to make major changes in the bank’s board. According to Cohan,

Much ink has been spilled lately about the challenging “hurdles” Citigroup—the US government-affiliated financial giant—now faces in finding at least six new board members to fill current or forthcoming vacancies on its 15-member board. As part of the deal reached last week, where the US Treasury will own 36 percent of the company, Citigroup Chairman Richard Parsons agreed that the majority of the board would comprise “new independent directors as soon as feasible.” 

… The problem for Parsons in finding a few more good men (or women) to serve alongside him, according to the conventional wisdom, is that the potential liability from peeved shareholders and creditors that Citi’s directors are—and will likely continue to be—exposed to as a result of the bank’s ongoing financial difficulties make the job anything but plum. And, of course, there is also the small matter that the board itself—despite the heroic efforts of the Treasury to make it appear not the case—will be watched over ever so carefully by a Very Big Brother. 

But, as usual, the conventional wisdom is wrong. In fact, there are many reasons why serving on the Citigroup board at this very moment can be a stimulating and richly rewarding experience. First, Citigroup indemnifies board members against most legal consequences of decisions they make as Citi directors. Besides, how bad could their decisions be at this point anyway? The stock is already trading at $1.50 a share (down 40 percent alone on Friday). How much lower can it go? Second, being part of the effort to craft and to implement the resuscitation of one of the largest financial institutions on the planet could be the intellectual challenge of a lifetime.

And third, the part-time position should be looked at as a form of patriotic government service, which it surely is… 

Cohan’s piece goes on to recommend a number of out of the box suggestions for the board.  While I agree it is important Citi’s board be changed, I am not certain many of Cohan’s suggestions are correct but he certainly has some unusual suggestions. Check out the story and the names he suggests.