Recommended Reading - CEO Succession Planning Lags Behind Research Finds, Stanford Graduate School of Business

The gap in succession planning at corporations continues to raise serious problems for companies. The Stanford Graduate School of Business’ June issue examined research on CEO succession planning conducted by Heidrick & Struggles, the executive search firm, and Stanford’s Rock Center for Corporate Governance. According to David Larker a professor at Stanford’s Graduate School of Business,

“We found that this governance lapse stems primarily from a lack of focus: boards of directors just aren’t spending the time that is required to adequately prepare for a succession scenario.”

To get a summary of the research’s findings go to Stanford’s GSB News.

Amgen Promotes CFO Bradway to President and COO - Succession Planning?

Amgen AMGN (NASDAQ), the world’s largest biotechnology company, announced the promotion of Robert Bradway, the firm’s CFO, to President and Chief Operations Officer. Bradway’s promotion comes at the same time it was announced that George Morrow, the firm’s highly regarded EVP of global commercial operations, would retire as of January 31, 2011. Amgen is currently awaiting a hoped-for approval from the FDA for its potential blockbuster osteoporosis drug denosumab. If the drug gets approved, Morrow would have been instrumental in the drug’s promotion and sale worldwide had his retirement not been announced. That new responsibility for sheparding the drug will now pass to Bradway.

Bradway’s promotion indicates he is being groomed for the CEO position held by Kevin Sharer. Sharerwho is currently 62, is expected to retire upon his 65th birthday. All eyes should keep a close eye on Bradway. A Reuters article raised the specter that Amgen is moving more and more away from research and development towards acquisitions. The article pointed to Bradway’s promotion as another indicator of this growing trend.

Recommended Reading - CEO Swap, The $79 billion plan, Fortune

Jennifer Reingold wrote a story for Fortune on the ’science’ behind the CEO succession process that recently transpired at Procter & Gamble. I wrote an earlier blog praising the process at P&G but Reingold has managed to go into the process with just a bit more depth. According to Reingold,

It is something strange in this era of failed leadership, abysmal succession planning, and dueling egos: a transition atop one of the world’s largest and most successful companies that is notable for what’s gone right.

Like just a handful of other companies, including PepsiCo (PEP, Fortune 500) and General Electric (GE, Fortune 500), P&G (PG, Fortune 500) has seen its ability to groom top talent as a competitive advantage — as much of one as its trademark on Tide or patent on Pampers. Although the company is 172 years old, it has had only 12 chief executives, all insiders, and among them two family members.

Check it out.

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.

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.

Northrop Grumman CEO to Retire with Succession in Place

Northrop Grumman NOC (NYSE) chairman and CEO Ronald Sugar will retire January 1, 2010. In his place the board selected president and chief operating officer Wesley G. Bush to run the defense contractor. Sugar, who has served as the company’s CEO since 2003, has been in charge of the firm as its value has continued to increase. Now that a new administration is in place and the U.S. economy has been under intense financial and economic pressures many defense industry firms have been working to move their operations more in line with the problems facing the United States economy. More consolidation and cost cuts can be expected over the next number of years in the defense industry. The selection of Wesley G. Bush allows for a smooth transition at the top of Northrop Grumman and the likelihood of a refocusing in the firm’s business strategy going forward.

For more:

Businessweek

Washington Post

WSJ

Bloomberg
Smartbrief (9/18)

Deere and Company Demonstrates Succession Planning

Deere & Company DE (NYSE) the heavy equipment manufacturer that has been impacted by the recession has announced a change at the top. Deere & Co. announced that president and chief operating officer and long time employee Samuel R. Allen would become the firm’s CEO on August 1. Allen who has been with Deere since 1975 will succeed current CEO, Robert W. Lane. Lane has been CEO since August 2000. Lane will remain chairman until some point in the future when Allen will take that position as well.

The change at the top comes as Deere has been facing serious difficulties. Deere has been cutting jobs and closing plants to deal with the recessionary forces buffeting the firm. While the change comes at a difficult time, it demonstrates a clear succession plan and an opportunity for the firm to continue working on ways to address its current difficulties and still find new opportunities internationally. Unlike many firms to day, Deere has demonstrated a clear succession approach.

Keep a close eye on the firm going forward as Allen takes over the executive reins.

For more:

Wall Street Journal

Reuters

Bloomberg

Smart Grid Related Firm, Itron Inc, Promotes New CEO

Itron, Inc. ITRI (NASDAQ), a global supplier of wireless data acquisition and communication products for electric, gas and water utilities yesterday announced reduced guidance for the first quarter and all of 2009.  The company also named a new CEO, Malcolm Unsworth the firm’s current president and chief operating officer.  Unsworth will replace LeRoy Nosbaum as CEO on March 31, 2009.  Nosbaum will remain executive chairman of the firm until the end of 2009.  The executive change at Itron comes at key time for the firm.  Itron is at the forefront of smart metering, a key issue the new Obama administration is expected to push for as it focuses on the improving the nation’s electric grid.  While Itron has an opportunity to take advantage of these potential changes, the firm along with some of its key competitors have found themselves facing a new competitor that could shake their foundation - Google.  Google recently announced it was looking to involve itself in the smart metering business.    According to a story by Katie Fehrenbacher in an earth2tech story referring to Google’s entry into the smart metering business,

… Google’s entrance into the space does raise a lot of questions for these firms. First off, will Google be a competitor or a partner?  

 … Perhaps a bigger question than whether Google is friend or foe is, who owns the relationship with the customer?  

… Beyond the issue of customer loyalty, Google’s entrance into smart meter software brings in a heavy-hitter for companies that are looking for Internet Protocol to be the basis of the next-generation smart grid. While some companies are hoping IP will be the dominant standard, many older companies have built networks and technologies on different standards, and even proprietary standards. Incumbent smart meter companies like Itron, Landis+Gyr, Elster and Aclara (part of ESCO Technologies) have already expressed concern over language in the stimulus bill that emphasizes Internet protocol for the smart grid.

Itron’s selection of Unsworth as the new CEO, an insider knowledgeable about the company, the industry and the vicissitudes of the industry was a well thought out decision.  The company’s board seems to be doing its job.  While Itron appears to be facing stiff competition from traditional competitors and now possibly Google, the company continues to have great potential.  Unsworth has shown himself to be a very capable executive who has the ability to stand up for the firm and make the right decisions in a difficult market.  Keep a close eye on the business decisions and possible changes Unsworth makes as he takes over management of the firm at the end of March.   For more:  Itron Press Release  RTT News  Briefing.com   

Recommended Reading - P and G can tap deep bench when its time for new CEO

Lisa Biank Fasig wrote a piece that appeared in the Business Courier of Cinncinnati that talked about growing speculation about Procter and Gamble's PG (NYSE) highly regarded CEO, A.G. Lafley.  Lafley has thrived as the company's CEO but he is now in his 60's and has completed the acquisition and integration of Gillette and thus, the firm may be getting ready for a possible successor.   

Recommended Reading - Finding and choosing a new CEO, Business Week

Business Week recently provided a quick and useful video of a presentation by Beverly Behan, Managing Director of the Hay Group entitled, Finding and Choosing a new CEO, How a board avoids CEO succession issues. Check out the video. 

Suggested Viewing - Talking Management - the war for talent

Kevin Moore of Canada's Report On Business (Globe and Mail) conducted an interview with OgilvyOne's Brian Fetherstonhaugh on how to find, and keep, the very best talent.  The interview is worth viewing if you are interested in corporate talent management. 

Recommended Reading - Ford Announces Six Candidates As Mulally's Future Successor

Amy Wilson and Richard Truett of Automotive News wrote a story today that examined six potential internal candidates that might rise to ultimately succeed Alan Mulally as Ford's CEO. The six candidates listed were as follows:

Lewis Booth, EVP in charge of Europe and Premier Automotive Group

Jim Farley - Group VP of marketing and communications

Mark Fields - President of the Americas

Joe Heinricks - Group VP of global manufacturing

Don Leclair - CFO

Stephen Odell - COO Ford of Europe

Let's hope they can do more for Ford than Mulally and the family have done. With the Automotive News story panic embraced Ford headquarters. According to a story by Alex Taylor III in CNN Money,

Immediately, the company went into panic mode.

"I'm not going to go there," said one of the purported candidates, Americas boss Mark Fields, when Automotive News asked him about the report. "I'm going to let the chips fall where they may."

Laymon's untimely disclosure will have the following negative effects on the company:

... It immediately sets up a horse race among the six candidates that could create unnecessary conflict and backbiting. Ford has a history of corporate infighting going back decades (Harry Bennett and Henry Ford II, Henry Ford II and Lee Iacocca, Bill Ford and Jac Nasser) and hardly needs any more of it.

It immediately makes Mulally a lame duck, even though his contract doesn't expire until 2011. Scuttlebutt around the copy machine will now focus more on who will replace Mulally than what Mulally himself is trying to accomplish.

Stay tuned to see how the company manages to handle this messy announcement.

For more:

Autoblog

Meg Whitman CEO, Ebay to Retire?

According to a story by Mylene Mangalindan in today's Wall Street Journal,

EBay Inc. Chief Executive Meg Whitman is preparing to retire.

Whitman is one of the most powerful women executives worldwide. For sometime now, it has been known that Whitman has intended John Donahoe as her likely successor. Donahoe, who previously worked for Whitman, at Bain & Co., is president of eBay Marketplaces. He joined eBay in 2005. In the Wall Street Journal story, Mangalindan states:

... retirement would come at a critical point for eBay. The company's auction business... accounts for more than two-thirds of eBay's nearly $6 billion in annual revenue but has experienced slowing growth rates for the past few years. Any efforts to reverse the slowdown could involve drastic changes that may be more palatable under a new CEO. EBay has already warned Wall Street in recent months that it may alter how it structures its fees for listing and selling items by collecting bigger fees once sales close.

Should the Journal be right, Whitman is making the correct choice. Despite being extremely successful in running the company, many people agree that much of the fun of using eBay has diminished over the years. While Whitman has been key in many successful acquisitions (paypal) she was also the person in charge during the Skype acquisition fiasco and the recent smaller acquisition of Stumpleupon another questionable transaction. The company needs new blood to find ways to make the site fun again for customers and to get the business model more in tune with changes in the market.

We will just have to wait and see whether the prediction is correct that she will retiring, and if it is, whether Donahoe ends up as the new CEO.

Keep a close eye on the upcoming financial announcements. Stay tuned.

For more:

Valleywag
Los Angeles Times
Business Week
Times Online
The Guardian
Mercury News
CNN Money

Target Undergoes Double Whammy in One Month

Target TGT (NYSE) seems to be having a tough month. First the company announces slower sales and anticipates slower sales going forward. This is all taking place while Pershing Square Capital, run by hedge fund activist William Ackman, amassed nearly 10% of the company's stock and continues place pressure on management. Then in early January, the company announces its long time and successful CEO, Bob Ulrich, will resign as CEO on May 1, 2008. Ulrich will remain chairman until the end of fiscal 2008. In his place, the company promoted Greg Steinhafel, the current president, to be the new CEO. Now comes news that well known creative designer Isaac Mizrahi, who has been so important in Target's success will be leaving Target to help revive Liz Claiborne. According to NPR's Marketplace,

The retailer apparently tried hard to keep the cheap-chic designer but wasn't willing to match Claiborne's offer.

Let's hope Steinhafel has something up his sleeve to help the company.

For more:

CNN Money (video)

Recommended Reading - Looking For A Few Good CEOs

A December 13 blog from Portfolio.com focused on the problems related to finding effective CEOs. The story is based on an October study by the Society of Human Resource Management Foundation. The 79 page study is a worthwhile read for people immersed in these problems or you can read the summary.

Recommended Reading - More on the Need for Succession Planning - WSJ

Carol Hymowitz wrote a story in today's Wall Street Journal entitled, Too Many Companies Lack Succession Plans, Wasting Time Talent. The story is a worthwhile read particularly if you are interested in CEO turnover and its impact on a company.

Recommended Reading - Forbes, Wanted CEO of major corporation

In light of the recent two major CEO changes (Merrill and Citigroup) Geoff Colvin of Forbes wrote an interesting piece on CEO succession planning. Obviously, the article was written after both aforementioned companies failed to have a succession plan in place. Take a look.