CEO Daily: Wednesday, June 24
Jim McNerney’s departure after a decade as CEO of Boeing signals stability, not change, at the aircraft company. The new CEO, Dennis Muilenburg, has been groomed for the job since 2013, and McNerney will stay on for a time as chairman to ensure continuity. That’s an improvement from the company’s last succession, when CEO Harry Stonecipher was forced to resign due to an improper relationship with a female executive.
The Boeing move marks the end of another chapter in the extraordinary CEO succession drama started by GE’s Jack Welch fifteen years ago. Welch set up a competition between three very talented executives – McNerney, Bob Nardelli, and Jeff Immelt – to replace him. He convinced his board to give all three massive stock option awards, promising they only would have to make good on one – the winner’s. The other two men would leave, and use those awards as bargaining chips in their next jobs.
That’s exactly what happened. Nardelli negotiated a rich package at Home Depot that eventually fed the controversy leading to his ouster. He later served briefly as CEO of Chrysler. McNerney was hired as CEO of 3M before trading that in for the Boeing job (which he won over Boeing insider Alan Mulally, who went on to become the highly successful CEO of Ford.) For those keeping score, McNerney had compensation of $29 million last year, while Immelt made $18.8 million.
But Immelt wins the longevity award. At 14 years and counting, there’s no sign he’s going anywhere. Check out his recent interview with Fortune’s Pattie Sellers here.
Immelt will be speaking next month at our Brainstorm Tech conference in Aspen, along with the CEO’s of companies including CVS, Best Buy, Flextronics, and Workday, and startups including Slack, Birchbox, Pinterest and HomeAway. Stay tuned to the CEO Daily for highlights.
• IBM, Box forge partnership
Under CEO Ginni Rometty, 104-year-old IBM is increasingly showing a willingness to partner with hotter Silicon Valley companies to help the tech behemoth better compete in the modern era. Partnerships struck with Apple and Twitter have ultimately led to Big Blue's latest venture: a collaboration with cloud storage provider Box. IBM gets instant Silicon Valley fred with customers, while Box gets to harness the bigger firm's massive sales and consulting organizations. Fortune
• Grocery store mega merger planned
Two European grocery chains have announced plans to merge and create a combined company that would be valued at $29 billion. Why should American shoppers care? Well, the two companies, Royal Ahold and Delhaize Group, generate about 60% of their sales in the U.S., primarily along the East Coast. The deal will combine the Stop & Shop and Giant chains under the same parent company. WSJ (subscription required)
Netflix has announced a plan to split its shares seven-to-one to make the stock more accessible to investors. When splits occur, the thinking is a stock can be more approachable with a lower price, even though the market value of the firm doesn't change (more shares are outstanding to lower the price). Notably, the move comes about a year after Apple split its own stock. Fortune
• Judge blocks Sysco-US Foods merger
A federal judge has handed the U.S. government a major victory in its quest to stop a $3.5 billion merger between Sysco and US Foods. The judge's decision could essentially kill the deal between the two largest U.S. food distributors. The merger, the Federal Trade Commission argued, could raise prices on goods delivered to national customers like hotel and hospital chains. Reuters
Angie's List, a subscription-based website that counts up reviews for local businesses, has sued Amazon.com, claiming the larger Internet firm has stolen provider lists and other proprietary information. A federal lawsuit alleged Amazon executives and employees got access to info by signing up as members of Angie's and using those details to establish a competing service. USA Today
Around the Water Cooler
• Coty pays executive not to be CEO
Beauty products company Coty is making a costly $1.8 million return. Elio Leoni Sceti, a frozen foods executive who had agreed to serve as Coty's next CEO back in April, has apparently changed his mind about taking that job and will not serve as CEO starting in July. But Coty still agreed to reach a “dissolution agreement” with Sceti to pay expensive severance package. Fortune
• Canada's booming "Hamptons"
Our neighbors to the north are importing a popular U.S. tradition: expensive summer retreat real estate. In Canada, the trend is popping up in the Muskoka Region, one of the world's fastest-growing recreational real estate market. Sales prices of expensive homes in Muskoka are booming, partly driven up by foreign interest, though property values are still cheaper than in East Hampton and other towns on the south shore of Long Island, New York. Bloomberg
• Wall Street's money pit
Activist investor William Ackman and other owners of the iconic Hotel Chelsea in New York City have reportedly invested $185 million to buy, renovate and convert the building into a deluxe hotel. What do they have to show for it? Not a whole lot. Millions have been spent on renovations, interest payments and other costs but the hotel, which has been closed since 2011, isn't expected to open before 2017. The cash drain has prompted the owners to look to borrow more money and bring in another equity partner. WSJ (subscription required)