Activist Investor Ron Burkle, a major investor in Barnes & Noble (BKS) NYSE, has been pressuring Barnes & Noble’s board for some time.  A few weeks back, Burkle accused B&N’s board of protecting the controlling family’s interests in the company after he tried unsuccessfully to increase his share in the company.  Burkle has been viewed by the board and many others as working to take over the struggling book retailer.  Today, shortly after the latest major dust up with Burkle,  the firm announced that William Lynch would succeed Steven Riggio as CEO.  Riggio, who is a member of the controlling family, after he leaves his CEO position will remain as the vice chairman of the firm.  The company’s press release stated Riggio would remain actively involved in the company.

Lynch, who has run the firm’s ecommerce business, has been viewed as the person responsible for launching B&N’s eReader the Nook which has been intended to compete with Amazon’s Kindle and now Apples iPad.  Besides the promotion of Lynch, the company also announced that the firm’s chief operating officer, Mitchell Klipper, would be promoted to CEO of the firm’s retail group.

Most analysts will likely view the latest moves as way to thwart further attempts by Burkle to get his way with the firm.  There is no way this recent move puts an end to the drama playing out behind the scenes for control of the firm.  In addition to Burkle, another activist investment firm recently bought a large portion of the firm as well. 

Stay tuned.

Westjet WJA (TSX), Canada’s second largest airline and for some time considered its most successful, Monday announced the sudden resignation of its CEO Sean Durfy.  Durfy took over the company’s CEO position back in 2007.  He has been with the airline since 2004 when he joined to head the airline’s marketing, sales and airport operations.  While Durfy has been instrumental in much of the low cost airlines success over the last few years, he has also been in charge of its efforts to grow which have seen a number of bumps in the road lately.  The low cost airline has been experiencing ongoing implementation problems with its new reservations systems and has found itself straining under its continuing efforts to grow.

Durfy’s resignation announcement was coupled with the airline’s appointment of Gregg Saretsky as Durfy’s successor.  Saretsky, the company’s current executive vice president of operations and vice president of WestJet Vacations, will take over as of April 1.  Saretsky has only been with the firm since June 2009.  He came to WestJet from Alaska Airlines where he worked for a decade.  Prior to Alaska Airlines, Saretsky worked for the defunct Canadian Airlines.

Durfy announced his resignation yesterday.  In the press release he was quoted,

“This was a very difficult decision for me; however, after careful consideration, I have decided that this is best for me and my family,” … “Those things I set out to accomplish at WestJet have now been achieved and I believe this is an appropriate time to allow others to carry the torch while I spend more time with my young family.”

After an agreed upon transition period up to September 1, Durfy will leave the firm and resign from the board of directors.

Despite many of the growing pains the airline has experienced lately, overall Durfy appears to have done a good job in managing the company.  It will be very interesting to see what type of stamp Saretsky will put on the firm.

Stay tuned.

For more:

Financial Post

CTV News

The Vancouver Sun

I Aviation CA (Update March 17)

Kevin Kelly, the CEO of executive search firm Heidrick and Struggles, and Gary Hayes, a partner in Hayes Brunswick & Partners, have written a propitious book, Leading in Turbulent Times published by Pearson.  The authors interviewed many top leaders who have managed to survive and often thrive during these difficult times.  According to a piece by Alicia Whitaker in the Huffington Post,

Kelly and Hayes found patterns among those who were being successful, across industries and geographies, with implications for anyone working to turn things around in this recession. Three things stood out for them: passion rules and carries the day, hard times call for a mastery of soft skills, especially communication, to motivate and engage people and keeping a long term vision in place and well communicated is the best way to keep focused and positive in spite of necessary firefighting.

The authors have presented highly organized perspective on the skills and techniques top executive need to survive today.

Technitrol TNL (NYSE), a worldwide producer of electronic components, appointed Daniel M. Moloney to be its new CEO.  Moloney most recently has been an executive vice president with Motorola and the president of its Home and Network Mobility business.  Moloney replaces James M. Papada III who has been the firm’s CEO and chairman.  The company has been planning for the succession for a long time.  Technitrol appears to have made a good choice for its next top executive.

Moloney had spent ten years at Motorola in a variety of high level positions.  The announcement that Moloney will be leaving Motorola comes shortly after the firm made it formal in early February that it would be split into two independent companies.   One company to be headed by Sanjay Jha, currently the co-executive of Motorola, would run the mobile phones and setboxes.  This was the company Moloney would have worked for if he had not decided to leave Motorola and become CEO of Technitrol.Moloney appears to have the skills and background to run Technitrol.  Keep a close eye on his moves for the next year once he gets up and running.

Earlier today Energy Solutions Inc. ES (NYSE) announced that the firm’s CEO and Chairman, Steve Creamer, had resigned his position effective immediately. The nuclear waste storage firm’s stock price plummeted today. Creamer’s resignation comes just two months after the firm’s CFO, Philip Strawbridge, had resigned. The company immediately replaced Creamer with Val Christensen, who has been serving as the firm’s president since 2008 and was previously evp and general counsel. The apparent abrupt management change was examined in a story by Bob Mims for the, The Salt Lake Tribune,

…slide may have prompted the new chief executive and the board to hold a quickly-announced teleconference call at mid-morning out of Boston, in which Christensen stressed that Creamer’s departure - though coming earlier than expected - had been part of a succession plan approved by the board early last year.

“This was going to happen this year,” Christensen said. However, he flatly refused to release detailed information on the reasons for Creamer’s admittedly “abrupt” decision to resign some one to five months earlier than originally scheduled. Christensen said Creamer made his decision during a board meeting on Thursday.

“About a year ago, I was made [EnergySolutions] president as part of a longer term succession plan. The board and CEO Steve Creamer identified me as the most likely candidate. Steve’s plan throughout the [past] year was to depart the company sometime in the spring or summer [of 2010].”

The dramatic management change requires investors to keep an extremely close eye on next week’s fourth quarter earnings announcement and moves that top management takes over the next six to twelve months.

John Thain, the former CEO of Merrill Lynch, who found his reputation in tatters after Bank of America acquired Merrill in the midst of the financial crisis, has been given a second chance to revive his reputation.  Yesterday, CIT Group CIT (NYSE) announced that Thain would immediately become the new CEO and chairman of the small business lender.  CIT had gone into bankruptcy under the leadership of Jeffrey Peek who ultimately had to give up his leadership role of the firm.CIT has been a very important lender to small and mid-sized businesses.  It finds itself coming out of bankruptcy and hopes Thain can work wonders with the firm.   An article in Forbes summed up Thain’s situation with regard to the Bank of America acquisition of Merrill and how it impacted his reputation and firm.

As chairman and CEO of Merrill Lynch, Thain’s deal to sell Merrill was considered a lifesaving move for the company at the height of the financial crisis. But he then came under fire for having paid out $3.6 billion in bonuses to Merrill employees just before the deal closed, and for spending more than $1 million to redecorate his office at Merrill, despite its massive losses.

CIT announced yesterday, as the firm moves out of bankruptcy, that Thain would serve as the firm’s new CEO and chairman.  Thain replaces interim CEO Peter Tobin who will remain on the company’s board of directors.  The decision to select Thain may actually be a good fit.  Thain’s expertise could actually be very beneficial to CIT’s circumstances.

Wednesday of this week, PSS World Medical Inc. PSSI (NASDAQ), a medical distributor company, unexpectedly announced the immediate departure of its CEO and Chairman, David A. Smith.  Smith who had been with the firm since 1987 and was appointed CEO in 2002 and later his Chairman in 2007 has left the firm with virtually no comment.  The company selected Gary Corless, another long term employee and the current COO, to replace Smith as CEO.  The company also appointed Delores Kesler, a director since 1993, as the new chairman.Smith’s sudden and unexpected departure had an immediate negative impact on the company’s stock.  Smith’s departure comes according to Kimberly Morrison, a reporter for the Jacksonville Business Journal,

The management change comes on the heels of several strong quarters of financial performance for the company. Despite a difficult environment, the company’s fiscal 2010 earnings growth is expected to be more than 30 percent.

PSS World Medical, a Jacksonville-based distributor of medical products, reported net income for the nine months ended Jan. 1 was $52.9 million, a 40.3 percent increase from the same period the year before. Although the third quarter results were slightly below analyst expectations, Kreger said the confirmed guidance suggested accounting and financial performance was not behind the change.

Investors will continue to wonder what exactly was behind the sudden change at the firm.  Corless, the new CEO, worked quite closely with Smith and is likely to continue the policies Smith put in place.  Anyone interested in this sector or specific company needs to stay on top of ongoing events.  The reasons for Smith’s departure will more than likely come out.

Lisa Kasenaar wrote an on-point piece for Bloomberg on the problems associated with high executive compensation at the top banks and the frequent failure for those firms to properly plan for succession.  Kasenaar wrote,

The global credit crunch and economic collapse of the past two years exposed pivotal management mistakes at the biggest U.S. banks — from slack risk oversight to multimillion-dollar bonuses for bankers chasing short-term profit.

Lewis’s (refers to Ken Lewis of Bank of America) exit highlights another kind of poor bank stewardship: the failure of CEOs and boards of directors to plan for an orderly succession when it’s time for the top person to leave.

Inadequate planning derails a company’s strategy and destroys employee morale, former executives, investors, recruiters and leadership consultants say. In the past four years, disorganized transitions cracked the foundations under some of the world’s biggest financial institutions, including Citigroup, Merrill Lynch & Co., insurance giant American International Group Inc. and Zurich-based UBS AG.

Anyone interested in compensation or succession planning must read the piece.

Borders Group BGP (NYSE), the struggling book retailer,  announced today that its CEO, Ron Marshall, has resigned as CEO and director of the firm effective immediately.  Marshall was appointed CEO just over a year ago.  Borders has been struggling for some time and has been facing increasing pressure from activist investors (Pershing Square Capital).   At the same time the company has appointed EVP and Chief Merchandising Officer, Michael J. Edwards, as the interim CEO.  According to a story by Mark Clothier for Bloomberg,

Borders… last reported an annual profit in 2006, has seen revenue drop for the past three years as consumers spent less on books and non-essential items amid declining home values and rising unemployment.

Marshall’s resignation comes after the company announced very disappointing sales news.  According to a blog story in The New York Times,

Last week, the company announced a nearly 14 percent decline in sales over the 11-week holiday period ending Jan. 16, compared with same period last year. The company was also forced to issue a statement denying rumors that it had extended the time it took to pay bills to small publishers.

Rumors abound that Marshall’s comes as he is about to take a new CEO position.The interim CEO has a very difficult task ahead of him.  Edwards has extensive retail experience but he has never faced a more daunting task than the problems currently faced by Borders.   The search for a new CEO will need to find a possible miracle worker.

Yan Zhang,  a professor at the Jesse H. Jones Graduate School of Management Rice University and Nandini Rajagopalan from the Department of Management and Organization at the Marshall School of Business University of Southern California have written a fascinating paper entitled, Once an Outsider, Always an Outsider? CEO Origin, Strategic Change and Firm Performance.  The authors according to a piece in Cellular- News have put together a,

… study that looked at the tenure and performance history of 193 CEOs in the industrial sector between 1993 and 1998. The researchers found that in the first few years of tenure, there is very little difference between the performances of CEOs promoted from within a company and CEOs hired from the outside. However, in later years, internally promoted CEOs outperformed externally hired CEOs.

“Newly appointed CEOs, both outsiders and insiders, tend to make changes, and it may take years to observe the performance impact of the changes,” Zhang said. “Therefore, the relative advantage or disadvantage between ‘inside’ and ‘outside’ CEOs in initiating and implementing appropriate strategic changes is not seen immediately.”

However, after three years, it’s clear that inside CEOs fare better than outside CEOs, according to Zhang. “When it comes to strategic change, outsiders typically are good at doing the rapid cost cutting and divestment. As tenure increases, obvious opportunities for cost cutting and divestment dry up. Inside CEOs, because of their deep knowledge and root in the firm, are more likely to initiate and implement strategic changes that can build the firm’s long-term competitive advantage,” Zhang said.

After reading the paper, I was not at all convinced by the research results presented by the researchers but anyone interested in key executive changes and what they mean with relation to corporate performance should read the paper.