Sealy Corporation Undergoes Major Management Changes

Sealy Corporation ZZ (NYSE), one of the largest the bedding manufacturers in the world, announced on Wednesday its chairman and CEO, David McIlquham who had led the firm for six years was leaving immediately. The board appointed Lawrence Rogers, a twenty nine year employee of the firm and since 2006 president of the firm's North American operations, the interim CEO. The company also announced that board member Paul Norris was named non-executive chairman. Norris is a former chairman and CEO of W.R. Grace and Company and, most significantly, a senior advisor at Kohlberg Kravis Roberts and Company (KKR), Sealy's largest shareholder. The company has also initiated a search to find a permanent CEO.

The management changes come as Sealy's performance and sales have been suffering in conjunction with the continuing decline in housing and the overall softening of the economy. It is expected that Sealy will seriously examine its overall strategic approach to its business as the company continues to see slowing growth, particularly in its North American marketplace. Sealy was formerly owned by investment firm Bain Capital. In 2004 the firm was bought by KKR. In 2005, the company filed an IPO and began trading in March 2006. Since going public the company has been expanding its US operations, it is possible that focus may shift. Sealy continues to maintain a strong market position as compared with its competitors. Its size has afforded the firm the ability to operate a large scale operation that controls virtually all phases of production, a situation that does not apply to its competitors.

Keep a very close eye on the moves the company takes for the next few months. It is likely that Norris will play a very important role in the next steps the company takes and will be very important in the ongoing CEO selection process.

Stay tuned.

For more:

Furniture Today 3/24
Reuters
Furniture Today
Yahoo

Online Jewelry Company, Blue Nile See Another CFO Turnover

Blue Nile NILE (NASDAQ) the online jewelry company finds itself with another CFO opening. Over the last year the position became vacant two other times. Robin Easton, who took over the company's CFO job back in September, resigned today and his resignation will become effective March 31 "to pursue other interests." Back in June, Scott Devitt, who served as Managing Director and Senior Analyst, Internet Consumer Services at Stifel Nicolaus & Co., was named chief financial officer. Shortly after his appointment, Devitt cited personal reasons and turned down the job.

Easton's latest resignation according to an AP story in the Houston Chronicle comes while,

Blue Nile shares dropped $3.01, or 7.2 percent, to $38.95 in morning trading. In the past year, the stock has traded between $38.21 and $106.16.

The company has been floundering as the retail environment continues to remain challenging. Keep a close eye on how Blue Nile manages to handle this type of dysfunction.

For more:

Businessweek
Puget Sound Business Journal

Recommended Reading - When Bad People Rise to the Top, MIT Sloan Management Review, Winter 2008

The Winter 2008 issue of the MIT Sloan Management Review Vol. 40 No. 2 contains a very informative article by Terry Leap, a professor of management at Clemson University entitled, When Bad People Rise to the Top. According to the What's Offline column by Paul B. Brown in Saturday's New York Times Business Section, Professor Leap's eight page article examines possible ways to avoid problem CEO's. In the New York Times piece, Brown stated,

Mr. Leap lists a dozen warning signs that boards should be looking for, and they include:

An obsession with acquiring prestige, power and wealth.” This, coupled with an inability to delay gratification, suggests that a chief executive may put his interests ahead of the company’s.

A reputation for shameless self-promotion and other self-aggrandizing behaviors.”

A tendency to create “grandiose strategies” without including a detailed plan for how they will be carried out.

The ability to compartmentalize and rationalize to an amazing degree. This trait, Mr. Leap writes, is shared by dysfunctional people, among them bad chief executives and criminals. Clearly, even the best chief executives occasionally exhibit some of these traits. “Potentially bad C.E.O.s, however, usually possess several of these characteristics and they exhibit them repeatedly,” he writes.

Mr. Leap says his message to corporate boards is simple: in the late stages of the selection process, spare no expense in digging deeply into a finalist’s background.

The article is definitely worth reading.

February CEO & CFO Changes Jump

Liberum, in a recent release, has found the level of executive turnover has continued at a rapid pace throughout February 2008. The trend for the period has followed the same turnover pattern registered for the previous month. Liberum projects executive turnover at the top to continue to remain high for the next number of months and possibly beyond. When the key turnover figures are compared for the months of February 2008 and February 2007 both CEO and CFO turnover registered appreciable increases. The turnover increases were as follows: 21% for CEOs and 10% for CFOs. Below is a graphical break down of CEO and CFO changes for February 2008 by market caps.

Recommended Reading - WaMu Board Protects Bonus Compensation of Top Execs

As the pay of top executives becomes a topic of discussion in Washington D.C. (today's hearings on C-Span) according to story in Reuters Washington Mutual's WM (NYSE) Board of Directors earlier this week defied the growing resentment over executive pay and,

approved a plan which helps protect its management's bonus targets from the impact of the subprime loan fallout, according to a filing with U.S. regulators.

... The filing, made with the Securities and Exchange Commission on Monday, refers to targets for WaMu chief executive Kerry Killinger, chief financial officer Thomas Casey, chief operating officer Stephen Rotella, and retail banking chief James Corcoran.

The board's committee said in light of the challenging business environment and the need to evaluate performance across a wide range of factors it will take a three-step approach to rewarding its executives including subjectively evaluating company performance in credit risk management.

Boards need to at least face reality in today's market and try make sound judgments. It does not appear that WaMu's board succeeded in this circumstance. Will their filing stand? Stay tuned.

For more:

Financial Week 3/10

Management Changes At Motorola Continue, CMO Out

Motorola MOT (NYSE) continues to try and find new ways to resolve its mobile phone related problems. According to a story by Wallin Wong in the Chicago Tribune earlier today,

Motorola confirmed Thursday that Kenneth "Casey" Keller, who had been marketing chief since October 2006, departed the company on Feb. 29. The company is not replacing him. Instead, Keller's two former deputies, Eduardo Conrado and Jeremy Dale, will now report directly to the presidents of their divisions.

... Motorola is searching for a new mobile devices head and is conducting a broad restructuring that could involve splitting the handset division from its other businesses.

The confirmation comes just after it became known that activist shareholder and major Motorola critic, Carl Icahn, increased his ownership of Motorola shares from 5% to over 6%. Pressures continue to build from a number of fronts on Motorola's newest CEO, Greg Brown, as he tries to find a formula to right the ship.

Keep a close eye on the company and moves taken by the CEO and Ichan.

For more:

BloggingStocks 3/7

New CFO at Bristol Myers Squibb May Mean Changes

Bristol-Myers Squibb's BMY (NYSE) board of directors recently elected Jean-Marc Huet senior vice president and chief financial officer. According to AccountancyAge.com,

The change which will take place on March 31 and comes one month after the pharmaceutical company reported an ‘impairment charge’ of $275m in auction rate securities, consisting in part of sub-prime mortgages for the fourth quarter, according to CFO.com.

Prior to joining Bristol-Myers Squibb, Huet served as chief financial officer at Royal Numico N.V. in Amsterdam. Before working at Royal Numico he was an executive director, Investment Banking Services, at Goldman Sachs International in London. Huet's appointment comes at the same time the firm also promoted Lamberto Andreotti to Chief Operating Officer. The management changes indicate something is happening at the firm.

Huet is known as a deal maker and is expected to work well with Bristol-Myers Chairman and CEO, James M. Cornelius. His appointment may be an indication that Bristol Myers is getting ready to do some acquisitions or looking to get itself acquired. Chris Kaufman of Reuters Deal Zone wrote a blog March 5th entitled, A Deal Maker for BMY in which he stated,

Huet’s M&A experience would fit well with that of Chief Executive James Cornelius who took the top spot last April. Cornelius had been chairman of medical device maker Guidant, and spearheaded its sale for $27 billion to Boston Scientific Corp just months before assuming his interim leadership role at Bristol. Bristol-Myers saw some divestment activity in December, announcing plans to sell its medical imaging business for $525 million to a private equity group as part of an effort to focus on its higher-profit prescription medicines, and has embarked on a major restructuring that will eliminate 10 percent of its work force and close more than half its factories over the next three years.

Keep a close eye on Bristol-Myers Squibb and particularly Jean-Marc Huet.

Atari Gets Major Boost With Phil Harrison Appointment

The ailing game publisher Atari, Inc. ATAR (NASDAQ) made a surprise announcement the other day. Former Sony Playstation software guru Phil Harrison, who recently resigned with great media fanfare as president of Sony Computer Entertainment's Worldwide Studio is now the new president of Infogrames Entertainment (Atari). Harrison will report directly to new CEO, David Gardner, who himself was hired away recently from Electronic Arts to become Atari's new CEO. According to a blog story by Marcus Yam for Daily Tech he pointed out Harrison said,

"This is the perfect time to join Infogrames and help shape the future of Atari - one of the industry's legendary brands," ... "As the game business moves rapidly online I believe we have an outstanding opportunity to create amazing network game and community experiences for players the world over."

Infogrames in a statement said,

Harrison, one of the founding members of the PlayStation team at Sony, will "grow the Atari brand into a leading online game company." His duties will be similar to his last position within Sony: Overseeing game development studios both internal and external while "attracting world-class design and development talent" to Atari.

Atari which has been facing serious problems on the NASDAQ exchange is starting to make product development waves. There might be something to them.

Stay tuned.

For more:

Silicon Alley 3/7
Press Release 3/6
NY Times DealBook 3/7

CEO Watch List - Rick Wagoner, GM, Update 2

Back in early November I placed Rick Wagoner, General Motor's GM (NYSE) CEO, on my CEO Watch List. Many specialists have given a positive take on Wagoner due to his efforts to turn the company around. I have been far more suspect. The recent GM announcement that current CFO, Frederick Henderson was promoted to Chief Operating Officer COO is just another indication of the company's frustration with Wagoner. According to a story by Mike Spector in yesterday's Wall Street Journal the promotion means,

Chief Executive Rick Wagoner will spend more time lobbying and traveling now that Frederick "Fritz" Henderson, the auto maker's current chief financial officer, has been promoted to chief operating officer.

Mr. Wagoner, speaking to a small group of reporters at the Geneva Motor Show, declined to say whether Mr. Henderson was being groomed for the auto maker's top job and stressed that the shuffling in executive ranks wasn't a reaction to GM's recent struggles. The promotion was "something I'd been thinking about for a while and talking to the board [of directors] about," Mr. Wagoner said.

... Mr. Wagoner, 55, said GM's top ranks had been "stretched" and that he will now be able to focus on other pressing issues facing the auto maker while Mr. Henderson focuses on more day-to-day concerns, such as maintaining the company's evolving global structure. Mr. Wagoner pointed to lobbying on environmental regulations and spending more time in fast-growing emerging markets as key priorities amid his new lighter workload.

If you look at the change more closely one might interpret Henderson's promotion as way to dilute Wagoner's power and actually push him upstairs. That is the way I interpret the promotion and is also the same take that Douglas McIntyre who wrote a piece in today's Bloggingstocks. According to McIntyre,

General Motors' (NYSE: GM) CEO Rick Wagoner has been kicked upstairs [subscription required], according to the Wall Street Journal. He will focus on international expansion and advanced technology. Not much of a job for a chief executive. Frederick Henderson will take over as COO and run the company's daily operation.

Wagoner's sin was that he could not launch products that would get GM back some of its market share in the U.S. He was able to cut costs and get an improved deal with the UAW, but GM's January sales were down over 12% in its home market. Its share in America is only about 25%. Toyota (NYSE: TM) has muscled GM out of its lead in small and mid-sized cars.

I plan to keep Wagoner on my watch list but there already appears to be a change at GM. Stay tuned.

For Update information see:

Financial Week 3/10
Lansing State Journal 3/6

Gap CEO Continues to Show Promise - Update 2

Todd Sullivan, a financial blogger, wrote a piece that appeared in today's Seeking Alpha that rightfully praised efforts by Glenn Murphy, the new CEO of troubled retailer The Gap GPS (NYSE), to turn the company around. Murphy put together a plan, and up to this point, has managed to execute it quite successfully.

Back when Murphy was first appointed in July of last year, many analysts raised doubts on his selection due to his lack of retail clothing expertise, I on the other hand was quite positive about the selection. While it was true, Murphy had little retail clothing expertise, he managed in his previous position as CEO of Shoppers Drug Mart in Canada to demonstrate an uncanny talent for running a successful business that relied on merchandising and retail expertise. Murphy still has a long way to go with the Gap, especially in this difficult retail environment, but he deserves praise for his efforts and results so far.

Stay tuned.

For more:

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