Why Should 3M Have 2 Expensive CEOs?

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Longtime 3M Co. (NYSE: MMM) board chair, president and chief executive officer, Inge Thulin, will become the executive chairman of the company on July 1. His top lieutenant, Michael F. Roman, will become CEO. Based on the company’s description of the two jobs, Thulin will continue to be a very active manager, to the extent that it appears he will not really leave his old job at all. Roman will report to the board that Thulin chairs.

Who is CEO and who isn’t? The board does not need two people to do a job that can be done by one and has been for some time.

Thulin’s roles as chairman, CEO and president did not appear to be a burden on him. Now, the board claims he needs a partner. Roman has been executive vice president and chief operating officer, and he has run 3M’s five divisions and international operations.

The description of Thulin’s job makes the changes even less beneficial to investors:

In his new role as executive chairman of the board, Thulin will continue to chair 3M’s Board of Directors while also working closely with Roman on longer-term strategic initiatives for the company.

The two men have been very well compensated over the past three years. Thulin made $56 million, according to the company’s proxy. Roman was only on the list of senior officers in the most recent year. He made $5 million. Presumably, he will get a large jump in compensation with his new job. And Thulin will continue to be paid, probably handsomely.

It is hard to argue that the two men, particularly Thulin, have earned such extravagant compensation. Granted, 3M shares are up 44% over the past two years. The S&P 500 is up 36% in the same period. And recent financial results have not been stellar. 3M had net income of $4.9 billion in 2015, while in 2017 the number was $4.8 billion.

The new 3M management structure is the equivalent of co-CEOs. That is good for Thulin and Roman. It is hard to make a case it is good for shareholders.