Two Chicago Guys and a CEO Search

Left to right: Walter Massey (courtesy, AJC)
Charles A. Tribbett III (courtesy, Russell Reynolds web site)


Bank of America Corp. (BofA) Chairman Walter Massey has named Charles A. Tribbett III of executive recruiter Russell Reynolds to assist with the recruitment of the bank's next CEO, according to people familiar with the matter. Efforts to confirm Tribbett's selection with a firm spokesperson were unsuccessful as of 5 PM EDT. News of the recruiting firm's appointment minus the personal name of the lead recruiter was first reported earlier today at http://www.wsj.com/ -- http://online.wsj.com/article_email/SB125545433529782763-lMyQjAxMDI5NTE1MzQxNTM0Wj.html

This decision signals deep local ties between two power brokers while underscoring the emergence of Chicago as an epicenter of influence in national political and business affairs.

It also sends mixed signals on whether BofA will consider internal candidates for the CEO position following previous reports speculating on where the bank will turn for talent.

Tribbett is the Chicago-based, domestic co-head of the CEO and board practice for privately held Russell Reynolds. Prior to joining the firm in 1989, he was a partner with Abraham & Sons, a private investment management and brokerage firm in Chicago. Tribbett also served as a corporate securities attorney with the law firm of Skadden, Arps, Slate, Meagher & Flom. He currently serves on the boards of Northern Trust Bank, Chicago Symphony Orchestra and the Chicago Council of Global Affairs, an "independent non-partisan organization" representing a Who's Who of Chicago, including First Lady Michelle Obama who is listed as a lifetime director on the organization's web site.

In addition to his chairmanship at BofA, Massey serves on the board of Oak Brook, Ill.-based McDonalds and is a trustee at the University of Chicago. He also formerly served on the board of Delta Corp. and First Chicago Corp. after a series of executive positions in higher education. According to the Atlanta Journal & Constitution http://www.ajc.com/business/massey-s-final-bank-159534.html, Massey and his wife, Shirley, currently live near the University of Chicago and the Argonne National Laboratory where he served as director.

It's not entirely clear where Tribbett will look to fill the CEO position of the nation's largest bank based in Charlotte, N.C. But one thing is clear: A closely related web of board and civic relationships between Tribbett and Massey will strongly inform who ultimately fills the position. Always has, always will.

# # #

BofA: Will grits remain thicker than water?

So week two drags on with the Bank of America Corp. (BofA) governance mess. The bank and its board remain under attack from every conceivable angle, leading to snap decisions such as on/off the shelf "emergency CEOs" that few understand much less believe to be part of a real solution. Mainstream media continue to speculate on the horse race or who will fill the role vs. what is needed to right the course.

Until someone steps up and actually says, "Stop, wait a minute! We're headed in the wrong direction," nothing is going to change. Which unfortunately means, for viewers of similar movies, nothing will change about this one's ending. Not even the credits.

Call it board leadership 101 failure for lack of better terminology. Nothing good happens when a gun is held at someone's head -- at least from a non-criminal point of view.

This reactive vs. proactive stance points directly to a deeper set of questions that needs to be answered before going any further in the CEO selection process.

Will BofA continue to be defined by an aggressive southern culture created by Hugh McColl and then leveraged by Ken Lewis? Is it time to turn the history page and step up as the nation's largest and most responsible bank in the post-collapse era? To borrow a witty phrase from a friend, will grits remain thicker than water?

None of the internal candidates publicly identified so far represent the bank's current culture yet BofA remains largely known by its Charlotte way of doing things. This fact leads to even more questions: Should the bank shutter its headquarter roots and move to New York where it can deal with regulators and other constituencies more directly? Will the new CEO have the external chops to deal with what's most important vs. urgent, or will the bank sink into the quagmire of a quasi-governmental agency?

No one, including board chairman Walter Massey, has stepped up to demonstrate a firm grasp of these issues. Every move so far has been bureaucratic in nature and defensive considering what's at stake. Sending signals that it will likely turn to an inside hand to stir the grits is hardly bold action. Nor does it make much sense unless they're not serious about change, which is always a real possibility.

Heck, even the now defunct GM board delivered clearer signals when they were slipping toward bankruptcy. BofA remains solvent, profitable in some business lines yet severely leadership challenged at the top, which is generally where it counts the most. Meanwhile, competitors such as JP Morgan Chase and Citi are licking their chops.

Here's hoping BofA deals with its leadership issues in a manner befitting a large corporation. If they can't, then owners should be demanding better -- across the board.

# # #

BofA: Let the horse race begin

Publisher's note: The following was first published today on BusinessWeek.com under their ManagementIQ blog heading. Find the direct link here http://www.businessweek.com/careers/managementiq/archives/2009/10/moment_of_truth.html. Or feel free to read on below.
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Whoever fills the CEO role, while sexy and headline grabbing, is not the most pressing need at the nation's largest bank. What's more important is how the BofA board decides to proceed with righting the bank's leadership course. This obviously includes the coveted prize, a new CEO, but to emphasize that decision at the expense of other more important matters represents bad governance. It also underlines the misguided longly held belief that great talent will solve everything.

Following are several steps that the bank's board should be considering if they're not already:

1. Replace the Chairman. Board Chairman Walter Massey is now inextricably linked to the former regime as a result of ongoing litigation, government investigation and personal relationship. This is a perceptual non-starter. It also represents a serious first challenge for the board to answer. Massey's tenure has been brief and was given rise to a previous crisis wave when investors forced Ken Lewis to sacrifice the Chairman title. The law of unintended consequences has been cruel here so far. Whether Massey can help right the course when he himself is under attack should be the board's first order of business.

2. Find a way forward, or out, of the regulatory and judicial jungle. New CEO or no new CEO, BofA needs to move expeditiously with trying to reach settlements across the board on all current legal matters. This may sound too ideal or pie in the sky. But even a better faith effort would send a stronger signal. Within this effort also lies a key competency for a new CEO. At least three quarters of the current leadership mandate is making sure the cloud that currently engulfs the bank is lifted.

3.) Consult Jamie Dimon at JP Morgan Chase. This step is more search-driven than strategic, but it's a practical step that only the truly hubris free will consider. Dimon has led an extremely successful, similar sized operation during a similar period of upheaval. No one else has the same knowledge or experience to deal with what faces BofA. To not consult Dimon on who he thinks would be a gross oversight. You can be assured of at least one thing: Whichever high end recruiter gets the assignment will take this step while simultaneously trying to woo talent away from underneath Dimon's nose.

This isn't about wasting a crisis or trying to bring Superman to lead the nation's largest bank. It's about doing what's right in the wake of months of misdeeds and leadership inertia.

If there is a silver lining, it's the fact that BofA's business appears to be on better footing than a year ago when the system collapsed. Yet unfortunately in this case that also speaks to a bank's greatest self perceived advantage: Time. Time to recover. Time to take more government money. Time to see assets come back. The more time a bank has, the longer it can live. Vice versa, the longer it can continue to do nothing and watch its once vaulted status nose dive into the abyss. Any of the major banks that neglects this consumer reality does so at their peril.

# # #

BofA Chairman forms search committee

Bank of America Corp. (BofA) Chairman Walter Massey has formed a search committee to find a new CEO to replace Ken Lewis, according to people familiar with the situation.

Two executive search firms, Spencer Stuart and Heidrick & Struggles, reportedly are in the running to present qualifications to the committee. Spencer Stuart has been working with BofA on board selection matters since earlier this year. Heidrick & Struggles has assisted the bank with management selection and recruiting senior-level managers over the course of the past decade.

BofA has added nine new board members in 2009, replacing former directors such as lead chair Temple Sloan and (Ret.) Gen. Tommy Franks with new members, including Dupont Chairman Charles Holliday who was named last month and four other directors who were named in June. This follows the addition of three new Merrill directors who joined the board in January. The bank also recently hired former Citi executive Sallie Krawcheck to run its global wealth management and advisory business while also consolidating several other senior roles in the bank's global consumer and investment units. Whether Krawcheck will be considered as an internal candidate to replace Lewis as CEO remains unclear.

The bank has no official CEO succession plan in place, nor does it have a contingency plan should current management face indictment as a result of ongoing litigation. Both Lewis and Massey have been subpoenaed in an ongoing investigation into the Merrill Lynch acquisition by New York Attorney General Andrew Cuomo. They also have been named as individual parties in an Ohio lawsuit, which seeks damages resulting from alleged misrepresentation of shareholder interests.

The combination of disarray at the highest governance levels, addition of nine new board members in a single year and the perceived taint hanging over the current day-to-day regime strongly suggests that BofA will turn outside the bank to find new leadership.

Whether that translates into a short-term or long-term CEO remains open to speculation until an interested and qualified candidate surfaces. Such a candidate will be expected to meet the strong approval of both the bank's overhauled board, key investors such as former Chairman and CEO Hugh McColl and the federal government.

BofA's two clearest options to fill the CEO post include:
1.) Bill Winters, former co-head of JP Morgan Chase's investment bank. Winters left Chase earlier this week following an executive shake-up. Winters played a pivotal role in the bank's success and had a birds-eye view of how his widely respected boss, Jamie Dimon, led during a similar period of upheaval. For a good summary, see http://blogs.harvardbusiness.org/cs/2009/10/what_the_jpmorgan_chase_shakeu.html. Dare we suggest Dimon himself to rescue the country's largest bank? According to the attached piece, his chief regret seems to be not serving his country. Ah yes, life is good at the top.

2.) Naming one of the current new "insider/outsider" board members as CEO. Spencer Stuart followed the same model at Delta when Richard Anderson was named CEO after joining the board prior to becoming the airline's top executive. This practice has grown increasingly common for boards and companies facing turmoil. Success depends largely on transparency and how relationships on the board coalesce around a chosen leader.

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ATL's non-teachable moment

Here's the latest POV from one blogger to another: http://saportareport.com/blog/?p=1748.

It continues to amaze how little behaviors change despite all the rhetoric, all the time on the subject of change. Atlanta and its ways are no exception. For such an easy place to live in, it almost does so in spite of itself.

# # #

"It was never about him"

Safe to say you won't find a more moving tribute to a friend than what Vice President Joe Biden conveyed earlier today on the passing of Sen. Edward Kennedy. Say what you will about our political process. Just don't confuse the messenger with the message when it comes to tributes. What Vice President Biden conveyed today on the passing of Sen. Edward Kennedy should be instructional for leaders of every shape, size or persuasion. For more on this moving moment, go to http://www.huffingtonpost.com/2009/08/26/bidens-emotional-kennedy_n_269331.html.

Insidious trend

So let's say you're a former CEO who moves into private equity. Before doing so, you help run a major company into the ground by leveraging up via acquisition when that same company needed to be paring down costs and changing its processes. Granted you did cut costs when losses started to mount. But that was only after the fact when you had no real choice.

Fast forward a few years later. You're still hanging out in private equity, tapping the rolodex for deals. Another major company from your homeland comes calling with a board seat. A few years later, you're made Chairman to calm things down after that same company goes through a major proxy fight.

Jacques Nasser, a.k.a. Jac the Knife, must be feeling pretty good right now. BHP Billiton, the Australian mining conglomerate, has just turned to the former Ford CEO to help sort out its future path. Here's the announcement: http://www.nytimes.com/2009/08/05/business/global/05mine.html?ref=business

Some might call this failing upward. Others might yawn and say "business as usual." A few might even have the courage to say, "eminently qualified for the job. Great leader," which is what Cerebrus basically said about Bob Nardelli in a recent statement after naming Nardelli to a key post following the Chyrsler bankruptcy.

This type of revolving door is an insidious trend that really needs have a door stop put in place. No failed CEO of a major company should go on to serve as Chairman of another major company. Period. End of story.

Note: BHP told the New York Times that they consulted with Heidrick & Struggles on the selection of Nasser and KMPG on a secret ballot distributed among board members.

Next thing you know boards will be playing duck, duck goose to ratify these types of decisions.

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Red rover, red rover, send Sallie over

(Editor's note: This column only represents the author's views, which are blogging by nature. Tinges of sarcasm are subject to safe harbor statement protection and do not intend to offend or misinform.)

In a largely unexpected move underscoring significant change, Bank of America (BofA) today appointed former Citi CFO and practice head Sallie Krawcheck as the bank's new leader in charge of global wealth and investment management.

Observers and compensation experts alike were seen quietly listening along the New York to Charlotte corridor for the original red rover request, which could be heard sometime this morning between BofA CEO Ken Lewis and Citi CEO Vikram Pandit.

This move certifies the power of failing up in an industry that's been flailing since well before last year's market collapse.

Krawcheck will join a senior team that now includes at least three bona fide candidates to replace CEO Ken Lewis when he's ready to go -- or when the board decides it's time for him to go.

There is no reported timetable for either option, although Lewis has hinted in previous interviews that it's not exactly a great job at the moment. Neither Lewis nor BofA board Chairman Walter Massey were available for comment, according to their personal bartenders.

Chairman Massey continues to move swiftly and deftly with mixing up the board's composition at the behest of the Obama administration. How he's able to do so without the official help of any of the major executive search firms defies human reason.

The only real question left behind this high-level talent mix-up is what role did the government play in approving the selection of Krawcheck? What exactly was required to get this plum assignment -- performance in previous positions? Extensive industry experience? Long lost uncle related to Obama or Geithner?

Most importantly...What will Krawcheck earn in her new position compared with what she received at Citi? Bonus watchers at both leading financial institutions will be waiting patiently for the answer.

The appointment of Krawcheck to head what's left of Merrill Lynch also unofficially signifies an internal horse race for top job at BofA. While it remains unclear who will ultimately get the CEO position, one thing is abundantly clear: The race will not produce anything dramatically different than what's been seen thus far.

Meanwhile, in other news, AIG has appointed a former MetLife CEO to replace the insurer's outgoing CEO, Edward Liddy, who used to run AllState. And Apple has decided that it's time for Eric Schmidt, CEO of Google, to step off the Cupertino, Calif.-based company's board. Liddy is rumored to be Schmidt's replacement, but the TGR could not confirm this to be true as of press time. Something about iPods not working in the board room.

Ah yes, the more things change, the more they stay the same. Captain Weill, more yacht steam -- it's time to return to port.

# # #

Obama's missed mandate

Government meddling with business ranks as the worst idea of the Great Recession (GR), according to a unscientific poll taken this month by the TGR. More specifically -- what the Obama administration has done and has proposed to do. And yes, that includes health care reform despite widespread agreement that something has to be done.

At the top of the worst list was the government's takeover of GM and Chrysler. A close second was anything to do with executive pay, ranging from restrictions to the appointment of a compensation czar.

On the side of best ideas, respondents seem to think the recession was having a positive impact on families and friends re-discovering what's important in their lives. That's a highly personal barometer, however, and not an easy one to quantify.

Here's where the TGR comes down on the best and worst of the GR. While we tend to side with advocates who believe government can't fix everything, what's more disheartening is watching a new administration flub its leadership mandate.

Obama was elected to reverse course on the Bush era and to change government so it can work more effectively without bankrupting the country. He was not elected to lay regulation upon more regulation or to hand-off major challenges to a Congress filled with mostly selfish special interest morons who think reading their own legislative bills is unnecessary. See the following exhibit if you haven't already: http://www.youtube.com/watch?v=ACbwND52rrw

Anyone who says Obama was forced to do things this way or this is what he intended to do all along doesn't grasp leadership. Let's go back and trace a couple key inflection points that help explain the current situation.

When the Obama administration started filling its ranks late last year with the "best and brightest" who have already served in government, that's when the mandate began to be missed. Not now when the going has gotten tough.

Way back before the current debate on health care was TARP, which now represents a Bush holdover. Then came the stimulus package, which no one who lives outside the bubble can defend as short-term financial stimulus. Much needed aid for the unemployed, yes. But help to small business, no. Fact: Only 10 percent of the approved funding will be spent this year.

By nearly every measure it was politics as usual during a time when something different was desperately needed. It's impossible now to ask for shared sacrifice, especially when major corporate CEOs perceive they can get what they want without having to pay a dime. Don't even bother on Cap and Trade, another legislative special interest boondoggle that appeared on the worst side of the GR ledger more than once.

Why didn't Obama and his capable insider hand, Treasury Sec. Tim Geithner, move more aggressively to end special favors emanating from TARP? Why are we continuing to handout public money to AIG? Why haven't the major banks been forced to disclose how much toxic asset remains on their balance sheets?

These are the tough questions that one seems to be asking -- much less answering from within the complex. Which isn't all that surprising seeing that it's occupied with revolving door members of previous administrations. Here's our view from last November when the crisis was in full force: http://povblogger.blogspot.com/2008/11/sailing-against-headwinds.html.

This is not a partisan message, nor is it an anti-Obama crusade. We want the guy to succeed in every way possible. Until more elected leaders share an interest in reforming government and its system and processes, then we're going to keep getting the same thing.

To those whom elected Barack Obama in droves, what do you think about how he's doing? Do you find that the same guy who ran for office is now serving as President? Trace those lines and feel free to comment when you get a chance.

The parallel in the corporate world is how CEOs jockey all their professional lives for the top job only to find that what they aspired to is far different than what they understood coming into the job.

Good news is there's still plenty of time to get the mandate right. Great leaders learn and adjust. We'll be watching Pennsylvania Ave. for signs that the nation's chief is making changes. And for those who say, "give the guy a break, it's only been six months," we say...You're right, but time is relative. When the mandate is misunderstood or missed, then everything else tends to follow suit.

# # #

Weather Channel picks non-TVer as CEO

So one of Atlanta's hottest brands, okay, formerly hot media properties, The Weather Channel, has settled on a TV industry outsider as their new CEO.

According to the New York Times, http://www.nytimes.com/2009/07/21/business/media/21weather.html?_r=1&ref=business, former venture capital advisor and publisher Michael J. Kelly will now serve in the company's top leadership role.

Interesting choice for several reasons:
1.) Kelly has no real network or cable TV experience, which strongly suggests that The Weather Channel will now fully embrace status as an on-line brand vs. TV channel. How that impacts their advertiser-based business model will be worth watching. It's a lot harder to make money on-line than it is charging ad rates the old fashioned way.
2.) The split in partnership between two private equity firms and NBC Universal means everything from this decision to how the channel operates likely will be done via watered down consensus. This is a far cry from independent status when the brand became an icon for "weather weenies" far and wide.
3.) Speaking of watered down, the perception of Kelly as a back-up selection to their primary choice means the new CEO will have to move quickly with a new stamp on what's already under way. The company has had several rounds of official and unofficial layoffs, the first in their history. How new leadership manages to inject life into this brand will make or break its future. Oh, and an economic turnaround to boost ad sales might help, too.

# # #

Ketchup kings and CEO comp.

You have to hand it to Goldman Sachs. They made "money the old fashioned way" and the new way. Good for them.

Standard corporations, however, continue to offer a different shade to the much maligned public issue otherwise known as CEO pay. Latest example that has a personal twist (shareholder since 2005): Heinz Chairman, President and CEO W.R. Johnson.

By all standard measures, Heinz has become a well oiled consumer products machine, thanks in part to accountability from outside investors. Mainly the hedge fund trader, Nelson Peltz, who currently serves on the company's board of directors and led a charge to shake things up a couple years ago. Revenues have been steady and net income has shown small incremental increases over the past several years. Both marks are commendable during a worldwide consumer recession.

The picture gets a little murkier when CEO pay enters the frame. Granted it takes digging a little to see the hues. According to the company's annual proxy statement, the board of directors raised total CEO compensation by $10 million between 2007 and 2008. Salary and bonus amounts increased only slightly. The bump was more in the deferred and long-term performance awards category (latter is a new column as of 2008.) Total value of CEO compensation was nearly $15 million in 2007. By 2009, the total comp. number had grown to approximately $24,398,056.

Money is money these days, and the large increase begs a few questions. Mainly is Johnson worth more than the next highest ranking executive by a 5:1 ratio? The CFO receives a little more than $4 million a year. For a company that lists "make talent an advantage" as a core corporate goal in 2009, such imbalance in compensation in the executive suite does not bode well for attracting other top performers.

Defenders of large pay packages love to wax about "peer-to-peer performance," but all that does is put CEOs in a higher class than other company officers, most of whom are more actively involved in the day-to-day operations of the company.

The more obvious Great Recessionary question: If you're a CEO of a major company and oversee an operation that stays out of the red, does that mean you should get a significant bump in total comp. simply for survival? Is not losing money the new success incentive measure?

Next thing you know boards and CEOs will be arguing for Darwinian clauses. In Heinz' case, if you can't sell more ketchup in the current dollar menu business environment, then when will you be able to?

It seems like a new set of pay incentive rules are being drawn every day. Here's hoping the set won't include more imbalances such as what the Heinz exhibit shows.

# # #

How much does Henry Kravis get?

Talk about a complex story reported completely different ways. What's a poor blogger to do?

The Wall Street Journal (WSJ) has buried their original Money and Investing cover piece, "KKR Stock is Coming, via Europe" on http://www.wsj.com/ -- to the point where it appears they're intentionally trying to de-emphasize the original story even if that's not true. Here's their version (requires subscription to access: Check that. The story link is GONE, as in off the list.) Strange days in new vs. old media land. It must be a really busy business news day.

The New York Times, meanwhile, has a more "so what" take -- http://www.nytimes.com/2009/06/25/business/25kkr.html?ref=business.

Getting to the point...The Times reports that KKR execs. will get "40 percent of carried interest" after a merger between a European-based subsidiary that they already own an interest in along with investors. Then, according to the WSJ, they're going to seek another listing on the New York Stock Exchange (NYSE) after abandoning a previous attempt to list on the NYSE last year. Bottom line: They're doing a Euro end around to access much needed public capital. For exactly what remains a bit unclear.

The only detail that really matters here is what KKR's Founding Partner, Henry Kravis, expects to take home and why? While the latter may be obvious these days, the road to this complex deal is anything but simple.

It continues to amaze how little details such as how much individuals receive don't factor into the equation. Sometimes it's obviously not clear until a public filing, which in this case might help shed light. But in the larger picture, it's almost as if they're all so larger than life, when in reality, they're less mortal now than ever before. Even Henry Kravis, the self appointed king of private equity.

# # #

In the nick of time

It's about time someone at a local leadership level woke up and did something in the public's interest.

DeKalb County CEO Burrell Ellis has asked the county's development authority to delay a decision that would have rewarded $52 million in tax abatement to an out-of-town developer trying to finish the next great mixed used park in northeast Atlanta. See the AJC's coverage by Ty Tagami at http://www.ajc.com/metro/content/metro/dekalb/stories/2009/06/18/sembler_0619_web1.html

While the final outcome remains up in the air, Ellis' leadership is a refreshing attempt even though it came late in the game. The system remains highly out of step. It's also a classic case study in how metro Atlanta's politico-business complex has been slow adapting to change in the new economic environment. Here's a run-down:

1.) Effective governance remains locked in a time machine with no sign of reform whatsoever. Members of DeKalb's development authority are appointed by the governor. In this situation, that means the authority could have voted to reward millions of dollars in tax abatement without a single locally elected official being held to a vote. What's the significance? The system gets gamed with personal preference, and without responsible watchdogs, it's impossible to hold anyone accountable.

2.) DeKalb's Development Authority (DDA) comprises a board of political appointees, not a robust slate of directors pushing for change. See for yourself at http://www.decidedekalb.com/site/authority/authorityLanding.html. The board chairman and vice chair have zero development experience in their background -- what makes them qualified to serve on a development authority?

3.) Old economic impact projection models no longer apply, or at least not in the current climate. When the economy is in tank, new expansive projects simply sap money from existing businesses. Standard projections about jobs and what the businesses will generate in economic impact don't take into account what is sucked away from other local companies feeding the tax base. Granted in some cases, properly managed projects can revitalize and strengthen local communities, assuming an open market. But what's unfolded doesn't qualify.

Don't misinterpret the message. We all want robust businesses willing to relocate and hire local workers -- especially when the state's unemployment rate is at a record high. But that doesn't mean those businesses should get handouts or 100 percent tax relief for doing so. Particularly not now when so much public money is being allocated that it's difficult to tell where it's going and what it's actually paying for.

Here's an idea to help reach compromise on the Sembler project. Why not ask for a revenue matching program? For every dollar generated by the project's development, $.25 or $.50 would go to specific teaching materials or after school programs for K-12 children in the DeKalb County schools.

The politicians will explain that away as impossible or not workable in the current system, to which someone needs to say, why not? If there ever was a time to demonstrate public leadership with money, then the time is now.

# # #

Au contraire, Mr. Rattner

Tuesday's selection of Edward E. Whitacre, Jr. to be Chairman of the "new GM" is starting to make a little more sense after reading today's story http://www.nytimes.com/2009/06/11/business/11auto.html?_r=1&hp=&adxnnl=1&adxnnlx=1244728921-+2dCjpiPUSmxex6n6dmDWQ by Michelle Maynard at The New York Times.

Auto Czar Steve Rattner was behind the decision to appoint Whitacre, according to the Times. Which still begs the question: Why do you need a search firm to find him? But that's beside the point.

In reference to changing GM's insular culture, Mr. Rattner says, “It’s not uncomplicated...We hope and believe that it can take place.”

If 'not uncomplicated' means lacking complexity, then this guy is all wrong. Changing GM's culture will require changing behavior, which can be complex and extremely difficult to do. Especially when the old guard remains in place calling the shots with a Chairman of the Board who has no real turnaround or expertise dealing with contemporary change.

This situation is shaping up to be a real albatross from every conceivable point of view. Sooner everyone wakes up and snaps to, the better.

Oh, and while that hopefully happens, someone please put a temporary halt to those slick ads, which should not run until re-emergence from bankruptcy. The last part of the TV spot even references "going back to Chapter One." What a bad choice of words. Guys, you're in Chapter 11 right now in case no one noticed. It's now impossible now to go back to first base.

# # #

Incredibly good take -- wish it were ours

http://www.businessweek.com/print/managing/content/jun2009/ca2009065_772331.htm

I don't normally fully endorse other POVs, but this fellow consultant is really on to something here. Those holding senior-level management and leadership positions would be well versed to read AND apply these points.

Big search firms live on -- for now

Love 'em or hate 'em, the large retained executive recruiting firms remain standing. Two in particular, Spencer Stuart and Heidrick & Struggles, are active at the highest levels, making daily headlines with General Motors (GM), AIG and Freddie Mac.

Spencer Stuart is remaking the GM board after the company named Edward J. Whitacre, Jr. chairman. See yesterday's post for our POV on this latest installment. http://povblogger.blogspot.com/2009/06/stuck-in-time-machine.html Summary: The more things change, the more they stay the same. Not to mention: Why do they need a search firm to find Ed Whitacre? Guess the answer is because the government told them to.

The latest flurry of high profile activity doesn't mean search firms are immune from change -- or that everything will remain in current form. Far from it. Every major search firm active in North America, with the exception of Egon Zehnder, has been forced to cut staff to the bone. Even the top privately held firms, which love to talk about the advantages of not being public, have whacked away forcibly within their ranks. Russell Reynolds reportedly has experienced four cutbacks during the past 18 months, while Spencer Stuart has cut staff for the second time since 2001.

What's leading the contraction? Well, for starters, the loss of good paying jobs at every level. Unlike the previous two recessions, this one has spared few levels except for CEOs, which (shock!) are the buyers who along with their boards generally hire search firms. Regrettably losses have not ratcheted down all the blah-blah about "talent war" and "shortage of qualified workers."

What the downward spiral has brought to the surface are a couple realities, which will either be dealt with or held in contempt at the firms' peril. First, the most sacred cow: How big firms are paid by clients. Pricing is getting whacked like a pinata. Anecdotal evidence suggests the traditional payment structure -- retained fees/expenses or one third of placement's first year salary -- will be revised as a result of the current recession. Some industries, such as private equity, have already forced their own variation. Other client buyers are asking that the final payment be paid upon delivery of a hired hand. At least one middle market search firm, CTPartners, is doing executive-level work for a flat fee and then asking for more business when the market turns.

The second reality is search as a traditional practice has grown dated by not innovating quickly enough to keep up with what's going on in the marketplace. Companies can't afford to get the leadership vs. management question wrong so they're turning more inward to more controllable practices, such as succession planning and development. Effective succession, such as what unfolded at P&G this week, doesn't require putting out a search. Then there's the simple reality that many inside companies don't have enough to do so they're handling recruiting themselves. Or the chosen few, such as GM, that require political cover.

The large publicly held search firms are currently caught in these crosswinds and have invested in two models, search and advisory. They'll tell you the businesses are complementary. But that's like saying you're a dentist and doctor, too. Talk to some big firm consultants and they'll tell you they don't even know what advisory services are offered by their own firm. Until the marketplace embraces one more than the other, then the muddle will remain.

Final thought: Only about 10 percent of the wider business public knows what executive search is. Even fewer fully understand "advisory," present company included. That leaves at least 90 percent left to offer up conjecture on something that they don't know anything about. What others do get are high profile brand names working in tumultuous situations. It's difficult to see that dynamic changing as long as Fortune 100 companies and their executives remain in existence. Unfortunately, or fortunately depending on market position, equally difficult to tell is what the major search firms will look like when the recession is over.

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Addendum: If you haven't seen the following gem on dealings between Whitney Group LLC and Hunt Scanlon, then you may want to: http://www.recruitingentrepreneur.com/2009-FEB.pdf. Not sure about the source, but at the very least, issue begs for an industry re-examination.

Stuck in a time machine

Is is it just us, or do Fortune 50 board-level matters feel stuck in a time machine?

Pick your exhibit: The so called Chairman of change at the new General Motors (GM), Bank of America (BofA) recently hired slate of directors or the proverbial AIG mix and match. Each has their own set of challenges. Yet all are united in one common governmental vision. It's time to cover our eyes and ears 'cause the governance horror flick is starting to make "Friday the 13th" look like a G-rated movie.

GM takes the cake with the hiring of former AT&T/SBC/Southwestern Bell CEO Edward E. Whitacre, Jr., a 67-year-old telecom cowboy of the tallest order. A person familiar with Whitacre used to regale us with first-hand stories dealing with 'ole Ed. Fear, intimidation and control were his management tools of choice -- no need to go there on evaluating his leadership style. This is the same man who didn't use email or a computer until his final years at the helm of the nation's largest telecom company. Whitacre evidently called called weekly executive meetings near his ranch in San Antonio every Monday morning. Executives had to show in person instead of calling in like they do in every other 21st century company. "Better to get everyone together, all in one place so I can tell them what to do," was the mantra; doing things his way or finding the highway was the other. To say Whitacre represents a different way to lead in a newly reorganized environment would be like saying former Vice President Dick Cheney personifies peace and love in a post-Islamic state.

But that's all water under the bridge. Now Chairman Cowboy can take on the New GM vision and everything else that comes with that bankrupt house of cards. Amazing. Just when you thought the page could be turned, it gets torn out of the book under the auspices of gray hair, experience and stability. Which, by the way, is what did in GM. But that's another story. Whitacre gets high marks in at least one required area: Dealing with government regulators, which he did so deftly there were often questions of who was regulating whom.

Here's a new suggested slogan for the Obama administration, which obviously signed off on this latest cutting edge decision. "Change We Can Believe In" should be renamed, "Change: It never happens in North America." At least not in the board rooms.

Where's Jon Stewart and Stephen Colbert to provide parody when we need them?

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Time to stir on BofA

So the nation's largest bank, Bank of America Corp. has finally made board-level change after being forced to by governmental gunpoint. Miracles never cease. Lead director Temple Sloan is out after 16 years of service. On a slow news Friday during a holiday week no less. For a guy with no real bearings in headquarters, Chairman Walter Massey is moving fast now. Look for a new director slate to emerge along AIG lines, or former industry chieftains representing lots of gray hair. Whether that will lead to actual change beyond the surface remains to be seen. Government is doing the bank's bidding. It's difficult to find anyone still in business who thinks that's a good idea or is willing to admit so publicly. But that's where we are -- for now.

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Take this jet and shove it

So we're based in Atlanta but have to receive something called the PE Week Wire to keep up with what's going on locally at The Weather Channel. Amazing. Here's the latest installment on CEO largess: http://www.nypost.com/seven/05062009/business/wrong_forecast_167802.htm?dlbk

Someone at NBC, preferably in a leadership not pencil headed management role, needs to step up and straighten out this broken process. Since buying the Weather Channel with a private equity consortium, the National Broadcasting Corporation has left their newest portfolio gem high and dry without effective leadership. First a long-timer named Deborah Wilson moved out while handing the job to interim help. Now they can't decide who should be CEO. The gap is beginning to show. From things as simple as lacking live storm coverage and programming to things as complex as leading through the toughest business climate in history, TWC has demonstrated all the signs of a rudderless ship.

Now some greedy former network hand wants to cover private flying privileges as a pre-requisite for the top job. Can we say completely out of touch? Where's the board, or better yet, is there a board to hold management accountable? Worse yet, why wasn't this story reported locally by the daily newspaper otherwise known as the Atlanta Journal & Constitution? Oh, that's right. They've re-designed and folded business coverage into another section -- not to mentioned launched a sexy new ad campaign. Wish we could say that's going to lead to more vigilance on shenanigans like what's been laid out here.

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Back to sleep

So Bank of America has stripped the Chairman title from CEO Ken Lewis. What an important news cycle story that means...very little. If they really wanted change, then they would have named Lewis chairman and appointed someone new as CEO. There's real default going on here, and as the TGR posted on Monday, it's getting stranger by the day. Newly appointed Chairman and long-time board member Walter Massey isn't a change agent by any measure. They've retained lead director Temple Sloan -- at least for now. Until investor Hugh McColl pipes up with something different then this one remains officially on snooze. Keep hitting the button, folks. It's not worth keeping our eyes open.

Lewis, meanwhile, continues to take actions and speak publicly as if he's the bank's most valuable employee. Here's the latest gem (Wall Street Journal, April 30th): Referring to the deal with Merrill, Mr. Lewis said, "My decision and the board's to go ahead with the merger was not about a selfish desire to keep our jobs," adding, "Every member of this board, including me, would be all right if we had to leave the company."

Someone needs to shake a few screws loose and remind him that he represents the bank's owners and customers. There's a big difference between punching the clock all your life inside an institution and acting in its best interests. But the difference seems lost on CEO ears right now.

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