Investing

Guidelines for Entrenched Corporate Leaders

Wehave compiled a list of very entrenched CEO’s (or Chairmen) that are in whatcould be deemed as an invulnerable position. Some holders or market pundits may have criticized them or even calledfor more oversight or removal, but these leaders are likely fixtures of thecompany whether shareholders like it or not. On companies that are majority owned these companies basically belong tothe leader(s) except on days when there is an annual shareholder meeting or aboard meeting. We are releasing thenames and logic behind the stories on Wednesday, Thursday and Friday of thisweek.

These lists are neverperfect, and this list is open for criticism.  In fact, if you would havesaid in 1998 that Hank Greenberg would be forced out because Eliot Spitzerthrew down the gauntlet and said he refuses to negotiate with the company itwould have seemed a low percentage bet.  It took blatant theft and whatwas going to be an assured conviction to remove Dennis Kozlowski fromTyco.  There are just some corporate figureheads that the company wouldn'tseem the same without.  Ninety-nine percent of America doesn't know the AIG and Tyco management names thattook over.  It usually requires scandal or perpetually consecutive underperformanceand is from obvious management blunders and gaffs before certain managementfigures become at risk.

Keep in mind that this is from a Wall Street perspective.  If you arean employee and have to deal with the wrath of a Chairman or CEO then you areentitled to a far different opinion.  But these names are perhaps the mosttied to the company and when people think of the company they think of thesecorporate leaders.

It is always important to remember that life does go on, even after key CEO’sleave.  Kings pass away or they abdicate, but what is clear in history isthat a successor has to be able to fill the shoes of the predecessor.  Justremoving a figurehead and hoping for the best is often a poor strategy. Most on this list are probably replaceable insome form or fashion, but the stocks probably wouldn’t react well to theirdeparture. Unlike the list of 10 CEO’sthat need to go from December, this list of corporate figureheads either needsto stay or trying to get rid of them would likely yield more grief than reward.

Jon C. Ogg


January 17, 2007