Monday, March 23, 2009

WHO’S MINDING THE STORE?

The uproar over AIG’s payment of $165 million plus in bonuses probably could have been avoided if the stewards of our country’s financial resources — Presidents Bush and Obama, Congress and assorted officials at the Treasury Department — had been paying attention before the bailouts were ever made.

The U.S. could have said: The price of the bailout? No bonuses. Alternative conditions? The American taxpayer must be reimbursed or the company must return to profitability before bonuses are paid. Certainly some contingencies should have been negotiated into the bailout of AIG. The aforementioned strategies would have eliminated the current contretemps.

As a result of the no-strings-attached policy, not only AIG but the government has suffered an image hit. To clean up its name as it undertakes to build its credibility, the government needs to answer questions about its fiscal management skills, particularly since it took over 80 percent of AIG. It needs to address what leadership knew and when it knew it.

AIG needs to confirm that only the financials products division was involved, and if so, let’s not take the whole company down with it, because the continual flogging of AIG only erodes its value and threatens our $170 billion investment. As Joe Nocera recently wrote in The New York Times, “Treating all of AIG like Public Enemy No. 1 is a pretty dumb way for a majority shareholder to act when he hopes to sell the company for top dollar.”

When you’ve got Congress expressing its shock and outrage over AIG’s distribution of bonuses that Congress itself previously chose not to prohibit … well, you’ve got to ask yourself, “Who’s minding the store?”

Technorati Tags: AIG, The New York Times, financial, President Bush, President Obama, Congress, Treasury Department, Joe Nocera , taxpayer, investing, government, investors, business, communications, public relations

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Monday, February 02, 2009

SUCCESSION PLANNING: REMEMBER THE CEO JUST RENTS THE OFFICE

In just the first few weeks of 2009, a number of corporate CEOs were sent packing. Seagate, Tyson Foods, and Borders Group were just some of the companies that announced changes at the top. Also, Apple chief Steve Jobs is taking a leave of absence for health reasons after months of speculation. More CEO changes are rumored to be on the way and may include some of the world’s leading companies.

The company’s reputation can be seriously tarnished if the succession issue is left unaddressed. For instance, commenting in his blog on the situation at Apple, New York Times business columnist Joe Nocera wrote: "The time has come for Apple's board to take control of this subject from Mr. Jobs and do the right thing by the company's investors.”

One of the main responsibilities for a CEO and the company’s board of directors is the development of a succession plan to insure the continuity of the company. Despite the critical importance of CEO succession, many companies are unprepared for the “changing of the guard” – either planned or unexpected. As a result, what should be an orderly, well-planned transition often turns into a crisis situation alarming virtually all of the company’s constituents – employees, suppliers, customers and, of course, investors.

One of our clients faced a succession issue, more specifically how to communicate the change at the top. The outgoing CEO was popular and successful. The board had identified his successor, a dark horse candidate virtually unknown to the outside world. Their initial plan was to announce the early retirement of the CEO without mention of his successor; a follow-up release would have identified his successor. We advised them that the executive changes should be announced in one comprehensive release to avoid unnecessary speculation and investor panic. They listened and we helped build an identity for the incoming CEO by arranging media interviews as well as through direct contact with the company’s investors.

In its report entitled, “A Practical Guide to CEO Succession Planning,” Russell Reynolds Associates, a leading executive search firm, outlines a number of steps designed to insure a smooth transition at the top. These include creating a written succession plan by the board, which should be reviewed twice a year. This plan establishes the basis for selecting a new leader through an examination of the company’s strategic direction while factoring in various business challenges. With the plan in place, the board can review internal as well as external candidates. The report also outlines the steps to insure a successful transition such as knowledge sharing between the outgoing and incoming CEO as well as a program to communicate with the company’s various stakeholders.

The current economic downturn will undoubtedly lead to more CEO departures. As the CEO is often “the face of the company,” its standing and reputation will depend on how the issue is handled.


Technorati Tags: Seagate, The New York Times, Tyson Foods, Borders Group, Steve Jobs, Apple, Joe Nocera, succession plan, Russell Reynolds Associates, investing, CEO, investors, business, communications, public relations

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