Recommended Reading - From CEO heroes to zeros

David Weidner's April 17 column on Market Watch entitled, From CEO heroes to Zeros examines three well known CEOs who he thinks have been over-rated and may deserve to be put out to pasture. Specifically, he examines Jeffrey Immelt, GE, Kerry Killinger, Washington Mutual and Ken Thompson, Wachovia. While I am do not view the position of these three CEOs in the same way as Mr. Weidner, the piece is a very worthwhile read.

CEO Watch - Jeffrey Immelt - General Electric

As nearly everyone knows by now, General Electric GE (NYSE) surprised the financial community and shareholders last week when it announced an earnings shortfall.  Even more surprising was the fact that the company's CEO, Jeffrey Immelt, according to The New York Times, had been quoted on March 13 at which time,

... he assured investors the company was on track to meet its profit targets. And in December, he told analysts that G.E.’s goal of earnings growth of at least 10 percent in 2008 was “in the bag.”

For a company GE's size and importance this was a dramatic slip up and raised a real credibility issue for Immelt to contend with.  The analyst community used the earnings shortfall as an opportunity to turn on Immelt and GE.   The New York Timers also reported in the same piece,

“There is no doubt that this is a historic event,” said Steve Tusa, an analyst with JPMorgan Chase. “The company has to convince investors that something is going to change.”

The negative news on GE has forced me to include Immelt on my CEO Watch list but I remain very skeptical that his status as CEO is currently in serious trouble.  I did, however, feel there was far too much negative news on GE's and Immelt's overall performance to ignore what has been going on. 

As the news filtered out on the earnings shortfall there were numerous other negative assessments put out and covered in the financial press.  Calls were again made for GE to begin seriously considering the sale of certain assets to help the company and make it more efficient and amenable to investors growing concerns.  At first, piling on the negative circumstances continued when well known former GE CEO, Jack Welch, was initially quoted in a USA Today story as well as others in which he said in an interview,

...he would "get a gun out and shoot" his successor, Jeff Immelt, if he allowed GE to miss earnings targets again.  "I'd be shocked beyond belief and I'd get a gun out and shoot him if he doesn't make what he promised now," Welch said on CNBC, a cable station owned by GE. "Just deliver the earnings. Tell them you're going to grow 12% and deliver 12%."

Welch then went on to say,

"Here's the screw up: You made a promise that you'd deliver this and you missed three weeks later," Welch also said. "Jeff has a credibility issue. He's getting his a— kicked. He apologized."

Welch after sleeping on his comments found a way to retract much of what he said.  According to a story earlier today by Nancy Moran and Rachel Layne for Bloomberg,

"In an effort to put GE's first-quarter earnings in context, I really stepped in it,'' Welch told CNBC. "Much to my shock and horror'' the comments "about the performance of GE and CEO Jeff Immelt were interpreted to mean the exact opposite than what I intended. Nothing is worse than having a predecessor perceived as commenting negatively on a successor."

I could go on and on about what analysts and shareholders are thinking and making known but for now, keep a close eye on GE and its numerous operations.  Something is bound to happen.

For more:

MSNBC (video)

Wall Street Journal

CNN Fortune

Business Week

AP

Times Online

Has General Mills Re-written Succession Planning Rules?

In what many considered a surprise announcement, General Mills GIS (NYSE), the second largest U.S. cereal maker, announced that its chief executive officer for twelve years, Stephen Sanger is stepping down effective immediately. The company promoted president and chief operating officer Kendall J. Powell to chief executive officer. Sanger will remain as chairman through May.

Company spokeswoman Kirstie Foster said,

...it was Sanger's decision to step down as CEO. The board made the decision Monday morning, she said, just before the the company's annual meeting. The hand over was, "a planned and thoughtful part" of the company's succession plan, although General Mills had not previously announced that Sanger would be leaving his post, she said. She went on to say, "The Board values Stephen's continuing leadership as chairman, and Stephen agreed to continue in that role for a time to aid in the transition".

It is very unusual for succession planning to work in this manner, yet there were some indications earlier that Powell was a successor in waiting. Earlier in the month, CFO magazine had a piece by Laura Mars about the ambiguity surrounding the vice chairman title. In the article, Mars referred specifically to Powell as Sanger's successor.

Powell appears to be a good choice to replace Sanger. Powell is 53 years old and has worked with the company since 1979. General Mills promoted Powell to president and chief operating officer in May 2006 after he increased marketing of new cereals to win back customers from Kellogg. He holds a bachelor's degree in biology from Harvard and an MBA from Stanford. The real question that remains unanswered is is why Sanger left or was forced out. The company met its expected numbers and has been performing quite well.

Keep a close eye on the company's operations and the steps Powell follows to transition to his new leadership.

For more on the change:

Bloomberg
Newsvine AP Story
Business Journal
Ad hoc News
Market Watch