03 April 2009

GM Says At Least Six More Will Go

As Originally Posted at the Wall Street Journal

At least six directors of General Motors Corp. will soon join former CEO Rick Wagoner in heading out the door.

The Obama administration said Monday that the embattled auto maker aims to replace "a majority of the board over the coming months." Federal officials also confirmed the appointment of Kent Kresa, a GM director since 1993, as its interim board chairman.

Mr. Kresa, 71 years old, was CEO of defense contractor Northrop Grumman Corp. between 1990 and 2003, and previously served on the board of Chrysler Corp. One person close to the company described him as "a safe choice," because he was one of the few GM directors who had run a major industrial company.

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Dennis Carey, a longtime acquaintance of Mr. Kresa and a senior client partner at recruiters Korn/Ferry International, called the new chairman "a very down-to-earth, very pragmatic fellow who will do very well dealing with the government" on GM's behalf.

Mr. Wagoner was the only GM executive on the 12-member board. His successor, Frederick "Fritz" Henderson, will likely be nominated as a director, according to a GM spokesperson.

In a statement, Mr. Kresa said the GM board intends "to nominate a slate of directors for the next annual meeting that will include a majority of new directors." GM has scheduled that meeting for August. However, the statement added, "the specific individuals who will be nominated or choose not to run or leave the board are not yet known."

The decision by President Barack Obama's auto task force to replace most GM directors came amid some pressure by company bondholders and other industry experts who had advised the task force in recent weeks, according to people familiar with the discussions. During one meeting, the board was described as "a collection of failed CEOs," and the group was blamed for not prompting GM management to move faster in restructuring the company.

Among the GM board members who may be vulnerable is lead director George Fisher, a retired chairman and CEO of Eastman Kodak Co. Mr. Fisher has consistently backed Mr. Wagoner as the company racked up billions of dollars in losses in recent years. Mr. Wagoner also relied heavily on Mr. Fisher for advice, say people familiar with GM. Mr. Fisher didn't return a call Monday seeking comment.

Mr. Kresa and Philip A. Laskawy, Ernst & Young's retired chairman and CEO, tried for two years to persuade fellow GM directors to replace Mr. Wagoner and other key executives, recalled a second person familiar with the situation.

Messrs. Kresa and Laskawy believed that GM's management couldn't sufficiently change its corporate culture, this person said. Mr. Fisher disagreed, arguing that "we can't get anyone better" than Mr. Wagoner, this individual continued. The dissidents "fought the good fight and lost," the person said. Mr. Laskawy, recently named outside chairman of Fannie Mae, leads GM's audit committee. He didn't return a call Monday seeking comment.

Another longtime board confidant for Mr. Wagoner was Eckhard Pfeiffer, forced out as Compaq Computer Corp.'s chief in 1999. Mr. Pfeiffer couldn't be reached Monday for comment.

Of GM's 11 outside board members, seven have been in place since 2003, the year that Mr. Wagoner became chairman. Its newest member, appointed last year, is E. Neville Isdell, Coca-Cola Co.'s chairman and former CEO. The only active CEO now on the board is Kathryn V. Marinello, chairman and CEO of Ceridian Corp.

The board also includes Erskine Bowles, chief of staff for former President Bill Clinton and now president of the University of North Carolina. He didn't return a call for comment Monday.

Some governance experts consider GM's board fairly weak because it lacks individuals with auto-industry expertise and includes several retirees without recent corporate-management experience. John H. Bryan, for instance, retired in 2001 as CEO of Sara Lee Corp. and has been on GM's board since 1993.

The 72-year-old Mr. Bryan "has been away from business a long time," an acquaintance observed. And "he has been there [on GM's board] too long." Mr. Bryan, a key Obama fund-raiser, didn't return a call Monday seeking comment.

Directors with extensive GM service likely won't survive the boardroom shake-up, said Ralph Ward, an author of books about governance and editor of the publication Boardroom Insider. "The longer you have been" at GM, "the less likely you will be around," he predicted.

It may be easier to remove directors than to replace them, however. The government may encourage GM to add directors with more automotive or industrial know-how, some observers believe. But, Mr. Ward says, "It will be a nightmare situation to get good people."

1 comment:

Burr Deming said...

I suspect Rick Wagoner was simply rolled up, stuffed into a cannon, and fired across the bow of other recipients of bailout dollars as a warning shot.