Tuesday, March 24, 2009
Recommended Reading - Kings of the Jungle, Barron's
Barron’s recently put out its annual list of the 30 most respected CEOs worldwide. This year’s list saw a number of changes from the previous year both in terms of additions and deletions. Many of the names that left the list saw their career fortunes take a turn for the worse, e.g., Sir Fred Goodwin of The Royal Bank of Scotland and Jeffrey Immelt of General Electric. The list is fun reading.
CEO Salaries - A New Trend in The Making?
As public rage begins to boil over with regard to taxpayer financed bonuses and the level of CEO salaries, particularly in the finance-related sectors, CEOs outside the finance related sectoir are beginning to take heed. Just today, Philip Boroff wrote a piece for Bloomberg discussing William F. Ruprecht, the CEO of Sotheby’ s. According to the story,
(Ruprecht) agreed to a 14 percent pay cut and the elimination of his cash bonus after profit plunged and the auction house fired workers.
Ruprecht asked the board to cut his $700,000 base salary by $100,000, or 14 percent, according to a statement the New York- based company filed to the Securities and Exchange Commission yesterday. The auction house also removed his cash bonus for 2008, which was $2.6 million in 2007.
Boroff went on to discuss other high level CEOs, Glenn Murphy of the GAP, Inc. and Craig Dubow of Gannett who have already agreed to a cut in their compensation. While these examples are far from a trend they may represent a shift in thinking on the parts of corporate boards and even CEOs who must face shareholders and the public during this difficult economic time period. We will just have to see what transpires with regard tyo compensation for top executives over the next six to nine months. Stay tuned.
For more:
Friday, March 13, 2009
Could AOL/Time warner Be on to Something?
Yesterday’s announcement that AOL is replacing its CEO, Randy Falco and COO, Ron Grant, after a transition period is no real surprise. Speculation about this change has been rampant for some time. The real issue revolves around the ann
Time Warner intends to spin off AOL at some point, they have already made that known. While I am very impressed with the fact that AOL snagged such a powerhouse as Armstrong, I remain skeptical about what even he can do. For the moment the selection is a positive for AOL and Time Warner but long term it will be tough slogging ahead.
Stay tuned this is going to be very interesting.
For more:
Wednesday, March 11, 2009
Recommended Reading - Hiring a New CEO? Go Outside the Company
Klaus Kneale wrote a fascinating piece in Forbes yesterday entitled, Hiring a New CEO? Go Outside the Company. Kneale’s piece refers to a study conducted by Vell Executive Search. The firm located in New England performed a study that,
looked at 51 CEOs and their companies’ revenue growth, focusing on publicly owned technology outfits based in New England with $100 million or more in annual revenues.
Externally hired CEOs at companies with over $1 billion in revenue brought in a median three-year revenue growth of 99%; their internally promoted counterparts achieved only 35% growth. Founders, which were concentrated in smaller companies, outperformed both of these groups.
The study raised a number of very important points about CEO succession but its overall conclusion, while worth serious consideration, does not adequately answer the real questions typically surrounding the efforts and goals behind finding a CEO replacement for a company. Each business circumstance is different, whether it is for a technology related company, a food company or other type of company and the CEO search must be dealt with in a manner capable of meeting a specific company’s goals and immediate needs. The study sample of 51 companies appears to have been far too small to make any sweeping conclusions.
Determine for yourself the applicability of the Vell study, read Klaus Kneale’s Forbes piece.
Tuesday, March 10, 2009
Monday, March 9, 2009
P and G Succession Plans May have Clarified
Early today Susan Arnold, the president of Proctor & Gamble Corporation’s (P&G) global business units announced she would retire effective September 1. Arnold actually stepped down from her position today and until her retirement will be working o
Arnold, who as been considered one of the most powerful business women in the world, has since 2007 been considered a potential contender for P&G’s CEO job should its highly regarded CEO, A.G. Lafley decide to retire. Lafley has continued to consistently state he has no intention of resigning in the forseeable future (check earlier blog). Lafley is currently 61 years of age and manadatory retirement at P&G is 65. Arnold along with P&G’s chief operating officer Robert A. McDonald who are both 55 years of age have been touted by analysts as the two top contenders for Lafley’s position.
Arnold’s announced resignation has put McDonald at the front of the pack as Lafley’s ultimate successor. According t
Her imminent departure appears to clear up the succession picture, leaving Chief Operating Officer Robert McDonald as the leading candidate to take over for Lafley. P&G historically picks a CEO from its executive ranks.
Despite all the denials by the firm, the question remains was Arnold pushed, and if so, does she expect at some point to take another position somewhere else? According to a story by Lisa Blank Fasig in the St. Louis Business Journal P&G’s spokesman Paul Fox said,
… it was Arnold’s longtime intention to retire when she turned 55, which she did on March 8.
Fox also said that Arnold ” has no plans to join another company at this time.” But she will continue to serve on the boards of the Walt Disney Co., McDonald’s, Catalyst and Save the Children.
The article went on to state,
In recent months, analysts have wondered if Arnold has fallen from favor with P&G because of struggles within the beauty care business, and particularly with the Pantene brand. Fox said such events played no role in her retirement.
I would recommend followers of Arnold’s career or people interested in qualified CEO possiblilities for top firms keep a close eye on Arnold for the next two years. We may see her unexpectedly pop up for a top position at some other top firm in the future.
For more:
Friday, March 6, 2009
U.S. unemployment Jumps to 8.1% While Executive Turnover Remains Slow
The bad numbers continue unabated. Today the United States Labor Department’s Bureau of Labor Statistics (BLS)announced the latest unemployment figures and they were not comforting. According to the BLS,
Nonfarm payroll employment continued to fall sharply in February (-651,000), and the unemployment rate rose from 7.6 to 8.1 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Payroll employ-ment has declined by 2.6 million in the past 4 months. In February, job losses were large and widespread across nearly all major industry sectors. The latest unemployment of 8.1 percent came close to matching the rate back in 1983 which had been the worst recession since the Great Depression.
These terrible unemployment figures have not been matched when compared with the turnover figures tracked by Liberum for top executives. Liberum’s 2009 February executive turnover totals have remained low, particularly when compared to the same figures registered in February 2008.
February 2009 CEO turnover declined 41%, CFO turnover declined 38%, C-level (defined by Liberum as board of director all the way down to VP level) turnover declined 41% and board of director changes declined 37% as compared with February 2008 numbers.
Liberum has also broken February’s CEO and CFO turnover totals down into market cap categories. Here too, the number changes have been very small particularly for the larger market cap firms. Part of the reduction for the largest market cap firms can be attributed to the fact that so many blue chip companies no longer meet the large cap figures of the past but that is just part of the story. Executives continue to focus their efforts right now on reducing company costs, production and employee levels. As a general rule, the executives themselves, despite a number of very high profile executive changes, have managed to remain immune from being laid-off. Below find two charts outlining the market cap related changes for CEOs and CFOs for the month of February.
Liberum expects executive turnover to begin rising in March and through the spring. Hopefully that will not be the case for general employment but it is likely the unemployment trend upward will continue for a number of months.
Thursday, March 5, 2009
CEO Watch - Ken Lewis, Bank of America, Update 2
Ken Lewis, Bank of America’s BAC (NYSE) embattled CEO, found himself today under added new pressure. CTW Investment Group which works with Union-affiliated pension funds just wrote a letter to the bank calling for Lewis’ ouster. The text of the letter appeared in today’s Charlotte Business Observer. CTW has often been a thorn in the back of top executives perceived as failing in their executive duties. According to a Reuters story CTW said,
if Lewis is not removed, shareholders should vote against the reelection of Lewis, Sloan and corporate governance committee chair Thomas Ryan to the board. Ryan is chief executive of CVS Caremark Corp (CVS.N).
Bank of America’s annual meeting is scheduled for April 29…
The real question remains what could a replacement for Lewis do at this point? Stay tuned.
Wednesday, March 4, 2009
Recommended Reading - The Smart Execs Leave Before The Fall, TechCrunch
TechCrunch’s Michael Arrington wrote a brief blog today examining what executive exodus’ might mean for a company. He points out,
When a smart, ambitious executive who isn’t the CEO leaves a company, it isn’t necessarily a sign of trouble…
…But when bunches of them leave, watch out. With obvious exceptions, like a sale that results in a lot of liquidity being sloshed around the founder ranks, fleeing talent is an indication that a company is about to go sideways, or worse. There’s a reason why most of Yahoo’s executive talent bailed out in 2007 and 2008. And that’s just a high profile example…
I refer to this article because it specifically reaffirms a conviction Liberum Research maintains on the importance of monitoring executive changes at companies. Arrington wrote this piece as a direct consequence of news that a number of top executives were leaving MySpace to start a new company. The real significance of the story is the importance that management change could mean for a company. Check it out for yourself.
Monday, March 2, 2009
Recommended Reading - Citigroup's Last Best Hope, The Daily Beast
William D. Cohan, a former M&A banker and well known business writer, wrote a clever blog piece entitled Citigroup’s Last Best Hope that appeared in today’s Daily Beast. Cohan makes the argument that Citi’s new Chairman Richard Parsons does not as many people suggest have a monumental task ahead in choosing new independent members for Citigroup’s board. Citi as part of its deal for more government funds agreed to make major changes in the bank’s board. According to Cohan,
Much ink has been spilled lately about the challenging “hurdles” Citigroup—the US government-affiliated financial giant—now faces in finding at least six new board members to fill current or forthcoming vacancies on its 15-member board. As part of the deal reached last week, where the US Treasury will own 36 percent of the company, Citigroup Chairman Richard Parsons agreed that the majority of the board would comprise “new independent directors as soon as feasible.”
… The problem for Parsons in finding a few more good men (or women) to serve alongside him, according to the conventional wisdom, is that the potential liability from peeved shareholders and creditors that Citi’s directors are—and will likely continue to be—exposed to as a result of the bank’s ongoing financial difficulties make the job anything but plum. And, of course, there is also the small matter that the board itself—despite the heroic efforts of the Treasury to make it appear not the case—will be watched over ever so carefully by a Very Big Brother.
But, as usual, the conventional wisdom is wrong. In fact, there are many reasons why serving on the Citigroup board at this very moment can be a stimulating and richly rewarding experience. First, Citigroup indemnifies board members against most legal consequences of decisions they make as Citi directors. Besides, how bad could their decisions be at this point anyway? The stock is already trading at $1.50 a share (down 40 percent alone on Friday). How much lower can it go? Second, being part of the effort to craft and to implement the resuscitation of one of the largest financial institutions on the planet could be the intellectual challenge of a lifetime.
And third, the part-time position should be looked at as a form of patriotic government service, which it surely is…
Cohan’s piece goes on to recommend a number of out of the box suggestions for the board. While I agree it is important Citi’s board be changed, I am not certain many of Cohan’s suggestions are correct but he certainly has some unusual suggestions. Check out the story and the names he suggests.
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