Of the many surprises surrounding Ellen Kullman’s abrupt departure as DuPont’s CEO on Monday, the greatest is being largely overlooked in the news coverage: It’s the company’s utter succession failure.
When DuPont announced Kullman’s retirement yesterday, it announced also that Ed Breen, who became a director only eight months ago, would become interim CEO “while the Board completes its search for the next executive to lead DuPont.” It might more accurately have said “while the board begins, conducts, and completes its search…” since the company announced it had retained an executive search firm. In addition, while Kullman remains CEO until October 16, Breen became “interim Executive” as of Monday. She isn’t a lame duck CEO; she’s gone. In short, this all seems to have happened very quickly, perhaps on Monday or maybe over the weekend, and DuPont’s board was entirely unprepared for it.
That is shocking for a few reasons:
-DuPont is an aristocrat of American enterprise, huge and successful for over 200 years. That its leadership pipeline contained no one who was ready to step into the CEO’s job strains belief. A well made succession plan always includes “a name in the envelope,” an executive who is prepped and ready to take over the CEO job at a moment’s notice if necessary. (At General Electric, for example, the name is widely assumed to be vice chairman John Rice, though the company never discloses this.) DuPont apparently had no one.
-Kullman had been CEO for seven years. Though she’s only 59, the process of developing potential successors should have been well along by now.
-In Kullman’s highly publicized proxy battle with activist investor Nelson Peltz last spring, she and the company stressed that they were managing DuPont for the long term, urging shareholders not to be beguiled by Peltz’s insistence on quick-fix boosts to profits. Yet this long-term oriented company seems not to have focused on the ultimate long-term investment, leadership development.
Kullman was undone by a plunging stock price and a profit outlook that turned bad and then got dramatically worse. Since early March, the stock was down some 38% (vs. a 4% drop for the S&P). Operating profit in last year’s second half was $0.96 a share; the company had previously said that this year it would be only $0.75; on Monday, the company said it would actually be about $0.40. It’s hard for any CEO to survive that.
Kullman now joins that unfortunate club of CEOs who step down abruptly with no permanent successor named, and the stock goes up on the news. DuPont gained about $4.5 billion of value yesterday.
Two of the greatest leadership scholars, Warren Bennis and Noel Tichy, wrote that “CEO succession in any type of organization – from political to not for profit, to business or the military – is the key determinant of organizational performance.” DuPont’s succession failure is worse than just a corporate mystery.
What We’re Reading Today
Ellen Kullman steps down as DuPont CEO
Edward Breen, a DuPont board member, will take over in an interim role starting Oct. 16 while the company searches for her successor. It ends a seven-year stint for Kullman. In May, she held off a bid to gain board seats from activist investor and DuPont shareholder Nelson Peltz. This news makes investors wonder why she needed to battle Peltz. While the board cheered when Kullman proved victorious this summer, markets soared on the news yesterday, with DuPont jumping 5% in after hours trading following the announcement. CNBC
House Dems threaten to release Hillary’s Benghazi interview
In a scathing letter to House Select Committee on Benghazi Chair Trey Gowdy, five House Democrats on the committee called the leaks released about Hillary Clinton and the attacks in Libya a pure political play. In response, they released a portion of the interview with Clinton’s chief of staff while she served as Secretary of State. They also threatened to release the full interview with Clinton, if Gowdy does not respond in five days. Washington Post
Volkswagen to halt non-essential investments
CEO Matthias Mueller has ordered a review of all planned investments. Anything that’s considered non-essential will be delayed or canceled as Volkswagen prepares for an onslaught of recalls and lawsuits due to the diesel emissions scandal. Bloomberg
McDonald’s all-day breakfast begins today
But that doesn’t mean it will be a home run for CEO Steve Easterbrook. One of McDonald’s biggest problems is its expanding menu, which all-day breakfast could exacerbate. Not to mention, what will happen when the “specialness” wears off? Fortune
Building a Better Leader
The new job interview…
…involves solving a series of games. Tech companies are using online games to cut through the massive pile of resumes. Fortune
We’re terrible at forecasting the future
You can improve if you’re able to put aside your opinions and only focus on the accuracy of results, according to new research. Knowledge@Wharton
U.S. agrees to landmark trade deal
The Trans-Pacific Partnership, agreed to on Monday night between the U.S., Japan, and 10 other nations, would be the largest regional trade deal in history and a historic win for President Barack Obama. But it now faces scrutiny in Congress, with presidential campaigns as a backdrop. Obama will sell the deal as a way to fight off China’s growing power in global commerce. NYT
European court strikes down data transfer law
The Safe Harbor decision allowed for U.S. and European countries to freely conduct business. But technology companies have used it as a means to store private information about European customers on U.S. servers, where privacy rules are less stringent. It’s a big blow for the likes of Facebook and Apple. Reuters
Fortune 500 firms hold $2.1 trillion overseas…
…to avoid taxes. Apple alone holds $181.1 billion overseas, reducing its estimated tax burden by $59 billion. If all the profits were repatriated into the U.S., the companies would owe a combined $620 billion in taxes. Fortune
Up or Out
Twitter general counsel Vijaya Gadde will take over as head of communications. Re/code
Cameron and Tyler Winklevoss won approval to open their Bitcoin exchange Gemini. NYT
Arena Pharmaceuticals co-founder and CEO Jack Lief has stepped down. Company director Harry Hixson will fill the role on an interim basis until a permanent replacement is found. San Diego Tribune
Fortune Reads and Videos
General Mills recalls 1.8M Cheerios boxes
It’s due to a potential wheat flour contamination in its gluten-free production line. Fortune
Time for DraftKings, FanDuel to merge?
Many investors think so. Fortune
Cisco CEO Chuck Robbins says that IoT is real…
…and still really confusing. He likens it to the early technology trends in the 1990s. Fortune
Uber, Lyft gain challenger in Boston
Fasten will offer cheaper rides by taking less from drivers. Fortune
On this day…
…in 1961, President John F. Kennedy urged Americans to build bomb shelters in the event of nuclear war with the Soviet Union. Soon after, Congress passed a bill to locate and stock fallout shelters in public and private buildings. Politico
Share Today’s Power Sheet:
|Produced by Ryan Derousseau|