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Illustration by Gilbert Ford & Alex Eben Meyer
Gilbert Ford & Alex Eben Meyer
During a series of meetings of directors of Minneapolis-based Medtronic (MDT) in recent weeks, board members have mulled potential successors to outgoing Chief Executive Officer William A. Hawkins. Although the 56-year-old Hawkins had been in charge for just three and a half years, he announced in late December that he would retire in April. During his tenure, the medical equipment maker's stock has dropped 30 percent amid waning growth for core products such as pacemakers. Medtronic now says it's looking outside its ranks for a new leader—a big change for a company that usually fills the top spot from within, but one that may be needed in its fast-changing industry.
"It requires that you keep taking a good look," says Medtronic director Robert C. Pozen, who lectures on corporate governance at Harvard Business School and is chairman emeritus of MFS Investment Management. Pozen declined to talk about Medtronic's CEO search but acknowledges that boards are under increasing pressure to maintain management performance. "You can make the right choice for CEO, [and] then if the regulatory environment or the business has shifted, he may no longer be the right person."
After three years of declining turnover among CEOs, churn at the top is back. As the economy improves, the rate of corner-office shakeups has picked up as more boards replace veteran CEOs with younger leaders with very different résumés. Many new CEOs have international experience and a track record in marketing or sales rather than finance or manufacturing, the specialties of CEOs two or three decades ago. They also haven't necessarily spent their careers at one company or in a single industry.
A case in point is Campbell Soup (CPB) Chief Operating Officer Denise Morrison. She will become Campbell's CEO in August, after zigzagging from Procter & Gamble (PG) and PepsiCo (PEP) to Nestlé, Nabisco, and Kraft Foods (KFT) before joining the soupmaker eight years ago.
Among other changes: new Pfizer (PFE) CEO Ian Read, who formerly was group president of its global biopharmaceutical business and earlier worked in Europe and Latin America, replaced Jeffrey B. Kindler, a lawyer with no operations or overseas experience; Google (GOOG) co-founder Larry Page, a software developer who is 38, replaced veteran executive Eric Schmidt, with the mandate to restore innovation to the Internet giant; and Advanced Micro Devices (AMD) CEO Dirk Meyer resigned after splitting with directors over the No. 2 chipmaker's strategy.
More reshuffling is imminent. Newell Rubbermaid (NWL) CEO Mark D. Ketchum, 61, plans to retire as soon as a successor is found. Ketchum sold off and restructured businesses during his five years at the helm of the Atlanta-based consumer-products maker. Now directors are seeking a CEO to expand the company, especially overseas. 3M (MMM) is evaluating several managers at the company to succeed CEO George Buckley, who plans to retire next year at 65.
Meanwhile, Sony (SNE) is conducting a search for a president who would be a successor to CEO Howard Stringer, who turns 69 in February. And a succession horse race among several IBM (IBM) executives is under way at that company. In July, CEO Samuel J. Palmisano will turn 60, the age at which IBM CEOs have typically retired.
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