Posted Sunday, April 25, 2004; 10.30BST
The jury remains out on some of the new CEOs, including Michael Diekmann at Allianz and Giuseppe Morchio at Fiat. Diekmann, 49, has bolstered the insurer's depleted capital base by almost €7 billion through stock, bond and asset sales, but hasn't yet turned around the lossmaking Dresdner Bank, Germany's third largest, which the insurer acquired three years ago in a move that quickly proved disastrous. Morchio, 56, is only promising to fix Fiat by the end of 2006.
No Rock Stars Wanted
The brash, swashbuckling style of fallen supermen like Messier — who referred to himself as a "master of the world" and published two autobiographies, one while he was CEO and a sequel after his ouster — has been consigned to history. "The extreme case of 'the company, c'est moi' is behind us," says Booz Allen's Newkirk. At the Zurich-based engineering giant ABB, Jürgen Dormann stunned senior managers by telling them in one of his first meetings after taking office in September 2002: "I don't like to work too hard or take decisions. You do that." It was a playful way of signaling that he intended to delegate operational management to his subordinates, and it marked a dramatic change for a company whose former leader, Percy Barnevik, imposed a rigid top-down culture on the firm. Barnevik moved on to become ABB chairman and gave up his roles of CEO and president in 1997, but his tenure was overshadowed by a pension scandal; an internal inquiry later found that he and his successor as CEO, Goran Lindahl, had awarded themselves pension benefits totalling $170 million. After a public outcry they paid half the money back.
Dormann's breath-of-fresh-air approach continued with a company-wide e-mail urging staff to stop making PowerPoint presentations for one another. "Consider this," he wrote. "Somewhere among the dazzling presentation techniques ... I sense a creeping loss of substance." That struck a chord. "Bravo!!! I am so tired of executives jamming phony presentations down my throat," one U.S. regional manager e-mailed back.
Debt is Bad ...
Nothing on corporate balance sheets so symbolizes the excesses of the 1990s as the towering debt left behind by fallen CEOs who couldn't control their acquisitive urges. Accordingly, the way their successors deal with that debt is key. Prize for the biggest reduction goes to Thierry Breton, 49, a sometime science-fiction novelist who moved from Thomson to take over France Télécom in September 2002. He is paring the France Télécom workforce by about 22,000 people, or 15%, mainly through attrition, and he has linked the pay of thousands of managers to tough performance targets. Debt tumbled from €68 billion to €44 billion in his first year, in part because Breton persuaded the French government and bondholders to put up fresh capital. Coming in a close second is Jean-René Fourtou, 64, a drug-industry veteran who took over France's teetering Vivendi two years ago and is turning it around (see next story).
... But Excess Is Worse
When CEOs in Europe and America impose fiscal austerity measures, they rarely include their own pay packages. But executive compensation has become a critical issue for investors, who are increasingly unhappy about overpaying for underperformance. The board of British drug firm GlaxoSmithKline cut the pay package of chief executive Jean-Pierre Garnier last December after shareholders voted it down at the annual meeting earlier in the year. (He still earned $5 million last year in salary and bonus, a 14% raise, but a golden parachute payment he would have received if fired has been cut.) At the Dutch retailer Ahold, which was battered by an accounting scandal last year, the new CEO, Anders Moberg, faced a storm of criticism when it emerged that he would receive a guaranteed €1.5 million bonus for each of his first two years, on top of a €1.5 million salary and stock options, as well as a hefty exit package. Moberg, a Swede who formerly ran IKEA, eventually agreed to take a lower salary and link his bonus to the firm's performance.
The Morale of the Story
Fear and loathing are often rife among employees when a new CEO comes in — especially when he's wielding an ax. Getting a firm working well again after a period of turmoil can require some internal gestures, both big and small. At Germany's Bertelsmann, one of the first moves by Gunter Thielen when he took over in August 2002 was to abolish the office of the chairman and the post of chief operating officer. Both had been created by predecessor Thomas Middelhoff in an attempt to consolidate power at the firm. "Thielen came in and said 'decentralize,'" says a senior Bertelsmann official. "More than anything, that restored calm." Thielen, a 24-year company veteran who also runs a small sausage factory in Saarland and a dental lab on the side, won a power struggle with the chairman of the company's supervisory board over plans to merge Bertelsmann's music division and Sony — and in January had his contract extended by two years to August 2007.
There's no guarantee, of course, that any or all of these steps will shelter a new CEO from investor wrath or ensure long-term success. Indeed, the management skills needed to restore a crisis-ridden company to profitability may not be the same as those required for years of sustainable corporate growth. "CEOs don't singlehandedly turn around a large organization," says Paul Coombes, a director of corporate governance at McKinsey. "The problem is that strategies change at a fast rate and need to keep adapting quickly, but organizational changes of a lasting sort require a great deal of patience." That may be. But at least the new boys know where they stand: if they mess up, they'll be out of a job fast — just like the ones they replaced.
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