Investors' Management Change Conundrum - Inside or Outside CEO?

Academics, investors, human resources, board members, corporate executives all have their own opinion on whethdr it is best to outside for a new CEO or hire from within. Liberum continually covers research that points to different conclusions on this question. A new report has come out that claims outside CEO hires tend to increase corporations’ market value. According top a story in Canada’s Globe and Mail, Spencer Stuart, the executive search firm, examined

… the track records of 210 new CEOs of large Canadian companies hired between 1995 and 2006, and measured how much the companies gained in share price during the CEOs’ first three years at the helm.

The results show better performance for CEOs hired from outside in all scenarios, but most especially when the firms are struggling and have forced out their existing CEOs.

The report challenges a view in corporate governance circles that CEOsuccessions work best when internal candidates are selected because they already know the company and need less transition time.

Anyone interested in this issue should contact Spencer Stuart to find out more about the study.

EasyJet Goes Outside the Box Again For A New CEO

EasyJet EZJ (LSE) the European discount airline, as it has done so in the past, has gone outside the company for a new CEO with no experience in the airline industry. Yesterday the company announced it has selected Carolyn McCall as its next CEO. McCall currently is the CEO of the struggling Guardian Media Group, the company that publishes the UK’s Guardian and Observer newspapers. McCall has overseen most of the restructuring efforts that the newspaper group has undertaken to survive in the latest troubles facing newspaper industries worldwide. McCall replaces Andy Harrison who will become the CEO of the Whitbread PLC , the hotel and restaurant group. While McCall leaves one troubled industry for another in which she has no experience, the selection still has merit. According to a story by Robert Lea and Susan Thompson in the Times Online who quoted an EasyJet insider,

“The airline has been looking for someone who has experience of a highly competitive market, someone from a consumerfacing industry, someone at home with the transition to the internet and someone adept at government lobbying. Carolyn McCall was a very impressive candidate.”

The airline has seen a number of management changes over the last few months. Back in January the company put in place a new chairman, Sir Michael Rake chairman of BT Group PLC and CFO, Chris Kennedy an EMI executive. All the management changes have taken place after one of the company’s major shareholders and its founder, Sir Stelios Haji-Ioannou, expressed his objections to the company’s aggressive plans for expansion at the expense of dividends. McCall is expected to toe the line with regard to the founder’s needs. She also appears to be a very interesting choice. Stay tuned

Activist Investor Burkle Pushes New CEO on Barnes and Noble

Activist Investor Ron Burkle, a major investor in Barnes & Noble (BKS) NYSE, has been pressuring Barnes & Noble’s board for some time. A few weeks back, Burkle accused B&N’s board of protecting the controlling family’s interests in the company after he tried unsuccessfully to increase his share in the company. Burkle has been viewed by the board and many others as working to take over the struggling book retailer. Today, shortly after the latest major dust up with Burkle, the firm announced that William Lynch would succeed Steven Riggio as CEO. Riggio, who is a member of the controlling family, after he leaves his CEO position will remain as the vice chairman of the firm. The company’s press release stated Riggio would remain actively involved in the company.

Lynch, who has run the firm’s ecommerce business, has been viewed as the person responsible for launching B&N’s eReader the Nook which has been intended to compete with Amazon’s Kindle and now Apples iPad. Besides the promotion of Lynch, the company also announced that the firm’s chief operating officer, Mitchell Klipper, would be promoted to CEO of the firm’s retail group.

Most analysts will likely view the latest moves as way to thwart further attempts by Burkle to get his way with the firm. There is no way this recent move puts an end to the drama playing out behind the scenes for control of the firm. In addition to Burkle, another activist investment firm recently bought a large portion of the firm as well.

Stay tuned.

For more:

Reuters

USA Today

Los Angeles Times

Slate's Big Money

Business Week

CNBC

The Deal.com (updated 3/22)

Canada's WestJet CEO Resigns

Westjet WJA (TSX), Canada’s second largest airline and for some time considered its most successful, Monday announced the sudden resignation of its CEO Sean Durfy. Durfy took over the company’s CEO position back in 2007. He has been with the airline since 2004 when he joined to head the airline’s marketing, sales and airport operations. While Durfy has been instrumental in much of the low cost airlines success over the last few years, he has also been in charge of its efforts to grow which have seen a number of bumps in the road lately. The low cost airline has been experiencing ongoing implementation problems with its new reservations systems and has found itself straining under its continuing efforts to grow.

Durfy’s resignation announcement was coupled with the airline’s appointment of Gregg Saretsky as Durfy’s successor. Saretsky, the company’s current executive vice president of operations and vice president of WestJet Vacations, will take over as of April 1. Saretsky has only been with the firm since June 2009. He came to WestJet from Alaska Airlines where he worked for a decade. Prior to Alaska Airlines, Saretsky worked for the defunct Canadian Airlines.

Durfy announced his resignation yesterday. In the press release he was quoted,

“This was a very difficult decision for me; however, after careful consideration, I have decided that this is best for me and my family,” … “Those things I set out to accomplish at WestJet have now been achieved and I believe this is an appropriate time to allow others to carry the torch while I spend more time with my young family.”

After an agreed upon transition period up to September 1, Durfy will leave the firm and resign from the board of directors.

Despite many of the growing pains the airline has experienced lately, overall Durfy appears to have done a good job in managing the company. It will be very interesting to see what type of stamp Saretsky will put on the firm.

Stay tuned.

For more:

Financial Post

CTV News

The Vancouver Sun

I Aviation CA (update March 17)

Recommended Reading - Leading in Turbulent Times, Pearson Books

Kevin Kelly, the CEO of executive search firm Heidrick and Struggles, and Gary Hayes, a partner in Hayes Brunswick & Partners, have written a propitious book, Leading in Turbulent Times published by Pearson. The authors interviewed many top leaders who have managed to survive and often thrive during these difficult times. According to a piece by Alicia Whitaker in the Huffington Post,

Kelly and Hayes found patterns among those who were being successful, across industries and geographies, with implications for anyone working to turn things around in this recession. Three things stood out for them: passion rules and carries the day, hard times call for a mastery of soft skills, especially communication, to motivate and engage people and keeping a long term vision in place and well communicated is the best way to keep focused and positive in spite of necessary firefighting.

The authors have presented highly organized perspective on the skills and techniques top executive need to survive today.