Recommended Reading - SEC Targets CEO Succession Plans - New Risks for Boards, Says Heidrick & Struggles

Heidrick and Struggles, the high end executive recruiter and consulting firm, put out a press release today entitled, SEC Targets CEO Succession Plans - New Risks for Boards. According to the firm’s release,

“There is a whole new level of risk for corporate boards that could stem from the SEC’s legal bulletin this week, ushering in a sea change in how directors will view CEO succession planning,” says Stephen Miles, Vice Chairman of Heidrick & Struggles and Managing Partner of the firm’s leadership advisory services.

The release goes on to examine what companies might need to do to respond to the SEC legal notice that came out October 27th. While Heidrick and Struggles might have a point about the risks companies face with regard to the notice, the reality is companies functioning properly with regard to CEO succession have little to be concerned with. Company boards should stay on top of the SEC notice.

Praise for BP's CEO

Tony Hayward, the CEO of oil giant BP, deserves credit for BP’s latest performance. According to breakingviews.com in the New York Times,

The worst may be over for the major oil and gas companies, if BP is any sign. The oil giant’s profit almost halved in the third quarter from 2008. But the drop was less than investors feared and income rose from the preceding quarter. Tony Hayward, the chief executive, can take as much credit as the recovering oil price for BP’s performance.

Hayward took over the CEO post at BP back in May 2007 after BP’s CEO at the time, Lord Brown, resigned after a legal injunction was lifted that had prevented publication of details about his private life.

Recommended Reading - Bank of America Bumps Into Hurdles in CEO Hunt, Wall Street Journal

The never ending saga of Bank of America and the search for Ken Lewis’ replacement continues. According to a story by Dan Fitzgerald and Joann S. Lublin for the Wall Street Journal,

Bank of America Corp.’s search for a new CEO has slowed as directors sift through outside candidates that are in short supply, according to people familiar with the process.

Check out the entire story.

For more:

NY Post

Dealbreaker

Dealscape

Bloomberg

Charlotte Observer

CEO Watch List - S. Sundaresh, Adaptec

Adaptec’s ADPT (NASDAQ) CEO, S. Sundaresh, has come under increasing pressure. Adaptec creates hardware and software to manage, protect and store digital data. Last week on October 22, RiskMetrics Group and Proxy Governance Inc. pressed for the removal of Sundaresh as Adaptec’s CEO. The pressure ratcheded up today when Steel Partners, the activist hedge fund and large shareholder in the company, continued its push to get Adaptec shareholders to follow suit by signing what is known as the White consent card. Steel Partners put out a press release today over Business Wire that was included in a Reuters link. Adaptec continues to fight back to try and stop the Steel Partners push. Back on October 6, Adaptec put out its own release to counter the arguments being made by Steel Partners.

Keep a close eye on how this all plays out. Activist investors are beginning to raise their heads again.

Recommended Reading - CEO Pensions Encourage Earnings Games, Business Week Management IQ

Nanette Byrnes wrote a fascinating blog last Friday for Businessweek’s Management IQ. Her blog piece examined a study by Paul Kaltya of McGill University that looked at how certain CEOs have managed their respective company prior to retirement and what it has meant in relation to stock performance and the CEO’s respective retirement payouts. Byrnes wrote,

The study by Paul Kalyta of McGill University finds that a CEO whose retirement pay depends in part on the company’s performance in his final years at the helm, will manage earnings up as he approaches retirement. After he’s gone, the stocks tend to drop sharply.

By contrast, companies whose CEOs don’t have this type of provisions in their Supplemental Employee Retirement Plan, or SERP, don’t suffer similar spikes and drop offs.

Event-driven funds should take a look at the study as well as anyone interested in executive turnover and its potential impact on stock performance. The report can be found in the Accounting Review as pointed out in Ms. Byrnes piece.

Caterpillar Shows How Succession Planning is Done

Caterpillar CAT (NYSE) today announced its CEO succession plan for the retirement of current CEO, James W. Owens. The company has picked an insider, Douglas R. Oberhelman, to succeed Owens. According to the firm’s press release,

The Board of Directors of Caterpillar Inc. (NYSE: CAT) elected Douglas R. Oberhelman to the offices of Vice Chairman and Chief Executive Officer – Elect, effective January 1, 2010. Oberhelman, 56,

currently serves as Group President of Caterpillar with responsibility for the company’s engine and gas turbine businesses, human services, rail services and remanufacturing divisions

…. Announcing the succession plan at this time allows Oberhelman to concentrate on aligning resources for the future and defining critical success factors for Caterpillar’s leadership going forward. He will serve as Vice Chairman and Chief Executive Officer – Elect until the June 2010 Caterpillar Board of Directors meeting, at which time he will be elected Chief Executive Officer and a member of the Board of Directors, succeeding James W. Owens, 63. Owens will continue to serve as Chairman of the Board and Chief Executive Officer until July 1, 2010. He will remain as Chairman of the Board through October 31, 2010, when he will retire in accordance with the company’s long-standing mandatory retirement policy and be succeeded by Oberhelman at that time…

Expect a relatively smooth transition going forward. More firms need to take heed and examine what Caterpillar has done on CEO succession.

Immersion corporation CEO Resigns and Leaves Immediately

Immersion Corporation IMMR (NASDAQ) which develops hardware and software for simulating tactile experiences — such as the feel of an object or the jolt of an explosion during a video game — in order to enhance on-screen events saw its CEO, Clent Richardson, leave today. The company has been at risk of being delisted from NASDAQ. Just the other day NASDAQ,

granted an exception to Rule 5250(c)(1) of its listing standards to enable Immersion’s Common Stock to remain listed on NASDAQ while it completes its internal investigation and restatement of its historical financial statements.

Immersion has appointed former CEO, Victor Vegas as the interim CEO.

Keep an eye on the moves Viegas takes and who the board settles on to take the CEO position. There may be more here than meets the eye.

Recommended Reading- Steven Rattner: Why we had to get rid of GM's CEO, Fortune

Steve Rattner, the former car czar in the Obama administration who was directly responsible for forcing Rick Wagoner out as GM’s CEO, has written a piece in Fortune that is getting a great deal of coverage. In a word Rattner, who was not a car industry specialist, depicts GM’s management and Rick Wagoner as follows:

In my relatively few interactions with chairman and CEO Rick Wagoner, I found him to be likable, dedicated, and generally knowledgeable. But Rick set a tone of “friendly arrogance” that seemed to permeate the organization.

Certainly Rick and his team seemed to believe that virtually all of their problems could be laid at the feet of some combination of the financial crisis, oil prices, the yen-dollar exchange rate, and the UAW.

It seemed completely obvious to us that any management team that had burned through $21 billion of cash in a year and another $13 billion in the first quarter of 2009 could not be allowed to continue. Equally important, GM’s February viability plan was more “business as usual” and not the aggressive new approach that we felt was essential.

There is nothing all that surprising in the story but rather it was just depressing. Let’s hope GM and other firms with similar problems can use the article as a means for making some real changes to make their respective companies and management more competitive.

Poor Earnings - CEO change?

Are we beginning to see some change in the top management environment? Throughout the current recession we have seen most public companies stay with their top management even as their firms continued to show weak results. Just lately, we have begun to see some companies that have fared poorly lately experience changes at the top. In my previous post, I examined the change at Nokia after poor performance. Now we have the announcement that Eric Claus the CEO of the Great Atlantic and Pacific Tea Company (known as A&P) GAP (NYSE) will be leaving his position immediately. Claus’ departure comes as the company’s performance continues to slide. While the change might not be considered a huge surprise it comes without a real successor ready to take Claus’ position. In the interim, A&P will be run by Executive Chairman and former CEO, Christian W.E. Haub. According to a story in the Wall Street Journal byKelly Nolan and Veronica Dagher,

Haub is also partner and co-CEO of Tengelmann Warenhandelsgesellschaft KG, A&P’s largest shareholder.

We may start to see more and more changes at the top of companies that fail to perform up to expectations.

For more:

Bloomberg

Marketwatch

APP.com

Recommended Reading- Update Bank of America's CEO search, Fierce Finance

Jim Kim of Fierce Finance provided a brief update on Bank of America’s search for a CEO to replace outgoing CEO Ken Lewis. Kim examines the latest news that Robert Diamond, Barclay’s CEO, took his name out of the running. He also reviewed the two internal candidates supposedly under consideration, Brian Moynihan and Greg Curl, two candidates I have already written about earlier and who I think should not be selected. Apparently according to Kim the buy-side community favors the appointment of an outside candidate. The article also provides a link to a video of CNBC commentator Charlie Gasparino discussing BofA’s search.

Poor Financial Results Usher in Quick Management Changes

Nokia NOK (NYSE) the once indomitable Finnish based wireless phone company just announced some management changes. Nokia who has found itself with an uphill battle in today’s smartphone era is battling Apple and many of the others. So far, its results have been nothing to brag about. In a story hat appeared on Newsvine,

The company said Timo Ihamuotila, head of global sales, will replace Rick Simonson as the chief financial officer on Nov. 1. Simonson will head the mobile phones sector in the devices unit.

Simonson has been CFO since 2004 and will continue to be on the executive board, Chief Executive Officer Olli-Pekka Kallasvuo said.

“After six successful years as CFO, it is great to have Rick move to such an important operational role,” Kallasvuo said. “Rick Simonson’s deep knowledge of the business and its financials will be valuable

for the significant part mobile phones play in Nokia’s business.”

These changes are surely not the end of the problems facing the company.

For more:

Barrons Tech Trader

Wall Street Journal

Bloomberg

BusinessWeek

CEO Watch Jeffrey Peek, CIT Update #2

Back in July, I placed Jeffrey Peek, CEO of troubled business lender CIT, on the CEO Watch list. Early today news came out that Peek, Chairman and CEO, would resign his position at the end of the year. Too often these days top executive changes take place very late in the game. Let’s see if CIT can find a way out of its troubles and bring in a leader that can help its circumstances. According to a story by Alan Rappeport for the Financial Times,

Peek’s resignation comes a little more than a month after CIT extended his contract by another year, signaling that he would lead the company through its restructuring. In his new contract, which was set to expire in September 2010, Mr Peek was prohibited from any compensation not permitted under the terms of the government’s troubled asset relief programme and lost the privilege of using the corporate aircraft.

Hopefully more companies will take a cue from CIT’s troubles and set in place succession plans and at a minimum, make management decisions more quickly when the circumstances require changes.

For more:

Bloomberg

NPR

WSJ Deal Journal

Recommended Reading - Who can fill the CEO seat?, Boston Globe

Todd Wallack, a reporter for The Boston Globe, wrote a terrific piece that appeared this morning on the search for a new CEO for Bank of America to replace Ken Lewis upon his retirement. Wallack examines the pressure to look for a candidate from outside the bank. He also mentions a long list of potential candidates from within the bank and outside. While much of this is a repeat of what has already been discussed their are some real nuggets of information in the piece. If you are interested in BofA, the story is a must read.

Suggested Reading - AIG's New CEO, American Public Media's Marketplace

Scott Jagow wrote a quick read piece on AIG’s new CEO Bob Benmosche for his Scratch Pad column on American Public Media’s Marketplace. Jagow manages to get the essence of how Benmosche in his short stay at his new position has managed to tweak so many. Below is just some of what Jagow mentioned.

… so far, he isn’t making many friends…

It started as soon as Benmosche was hired. His first action as head of AIG was to take a two-week vacation in Croatia. There, he told reporters he wasn’t in any hurry to repay the TARP loan by selling off assets too quickly. This didn’t go over too well with some members of Congress.

Then, he was quoted as saying that New York Attorney General Andrew Cuomo “doesn’t deserve to be in government.”

Let’s hope he ultimately does better with the company itself. Stay tuned.

Recommended Reading - Bank of America's top pick for a new CEO? The one who created this mess, BloggingStocks

Zac Bissonnette, a frequent contributor to BloggingStocks.com, wrote a spot on piece on the possibility (mentioned by the WSJ and Atlanta Business Chronicle) that Bank of America may select Gregory Curl, the bank’s chief risk officer, as an interim CEO. The interim CEO would serve until a permanent replacement is found for Ken Lewis upon his retirement. What is the bank (the board) thinking? This is the kind of trial balloon that should never happen. Curl was the chief risk officer at the time of the ill-fated Merrill acquisition. Stay tuned.

For more:

ClusterStock

Recommended Reading - Can Good Leadership be Learned?, The Atlantic

Lane Wallace ,a correspondent for The Atlantic, examined Alan Deutschman’s new book, Walk the Walk: The #1 Rule for Real Leaders. Wallace was pleasantly surprised at how insightful the book was. She wrote,

… Deutschman’s premise about the importance of management being authentic, honest, and not asking anyone beneath them to meet any standard or make any sacrifice they’re not prepared to meet or make themselves is clearly not as obvious or widely understood as I once might have thought. Take yesterday’s column by David Carr of the New York Times about the management at the Tribune Company arguing to a bankruptcy court–after leading the company into bankruptcy (in no small part because of a badly-conceived, heavily-leveraged purchase that left the company saddled with debt) and depriving more than 2,000 employees of jobs– that the managers should be awarded between 45 to 60 million dollars in performance bonuses. The bonuses are necessary, the company’s lawyers argued, because getting a company out of bankruptcy is hard work, and “not being rewarded for hard work and hard effort is demotivating.”

… Another point Deutschman makes is that a great leader has, in the words of Urban Meyer, head football coach at the University of Florida (where Tim Tebow plays), “the ability to make the level of play of everyone else around him better.” Again, a seeming statement of the ridiculously obvious. But consider this piece on Bank of America’s outgoing CEO (and former chariman) Ken Lewis, who announced last week that he was retiring–although he said he’d stay on through December because a successor wasn’t waiting in the wings. And why wasn’t a successor waiting in the wings? Because, according to the article’s author, Joe Nocera, Lewis “brutally fired many of the firm’s most talented executives, seemingly afraid to be surrounded by potential successors.”

The book appears to be worth a read.

Liberum Research - Third Quarter Executive Change Comparisons Show Declines

The overall unemployment figures continue to diverge with executive turnover figures compiled by Liberum. Liberum has just completed analyzing third quarter figures for executive turnover. The key totals showed a continuing decline in executive turnover for CEOs, CFOs and overall C-level management as compared with the same time frames in 2008 and 2007 (view graphs below).

• CEO turnover declined 23%, CFO turnover declined 36% and overall C-level turnover (from board of directors on down to corporate vice presidents) registered a 24% decline for the third quater of 2009 as compared with the third quarter in 2008. The decline percentages were even larger when compared with the 2007 third quarter.

Investors need to keep a close eye on specific executive changes as well as the actual trends.