Blog > Category: Business
From Fast Company, posted April 17, 2015
On a broad scale, how do we create altruistic organizations that can really transform society and transform economic systems? This is the field I’ve been studying since I left the corporate world eight years ago, and I’m convinced that the key to this is compassionate, authentic leadership. We need a new generation of leaders to step forward and provide this new kind of leadership.
My basic premise is that compassionate, authentic leadership is essential. It’s not just that it’s good to have—it’s necessary for a healthy society. I’m disappointed in my generation of leaders; I believed that they failed in their responsibility. As a result of the failures of leadership in the last decade, there’s been a loss of confidence in our leaders, and a loss of trust. Each of us who takes a leadership role has a responsibility to the people we serve. If we put ourselves ahead of the public, we have failed in our responsibilities and we can cause great harm.
At my former company Medtronic, which makes medical products, our mission and our meaning was to restore people to full life and health. The way we measured ourselves was not by earnings per share but by how many people we helped. My greatest source of pride is that in the time I was there, we went from 300,000 people per year to 10 million people per year who were being restored to fuller, more active lives through our work. We always tried to convey this meaning to the people in the company, because that’s what inspired them, not the stock price, not the earnings.
THE CHANGING ROLE OF LEADERS
The role of the leader in this century is different than in centuries past. It’s to bring people together around this sense of meaning, purpose, and values. It is a very difficult task, particularly in organizations that span the globe, to gain that kind of alignment where people believe in the purpose of the organization and practice its values.
The second role of the leader is not to exert power over other people. Many scholars have written about leadership as power. This idea of power suggests a zero-sum game: if I give you power, I have less. But I reject this idea. I think leadership is about empowering people to lead. If we can empower other people to step up and lead, then we have much stronger organizations, and we can all contribute to the best of our abilities.
Let me give you an example of a woman whom I met at Medtronic many years ago. She was making heart valves. If a human heart valve failed, they could actually take a valve from the pig and use it to replace the failed human heart valve. This woman was the top worker in the plant. When I asked her about her work, she looked at me with passion in her eyes and said, "My job is to make heart valves the save people’s lives. I make one thousand heart valves a year. If one valve is defective, someone will die, and I could never live with the idea that I caused the death of another person." But she also said, "You know, when I go home at night, what I’m thinking about is that there are five thousand people in the world today who are alive and healthy because of the products I made."
This woman is an empowered leader. She doesn’t have a formal leadership role, and she isn’t a supervisor, but everyone looks to her for inspiration. This is the kind of empowered leadership we need to spread more broadly.
—William George is a professor of management practice at Harvard Business School, where he teaches leadership development and ethics. He is the former chairman and CEO of Medtronic. Under his leadership, the company’s market capitalization grew from $1.1 billion to $60 billion, averaging a 35% increase each year.
This has been a very good week for America – a week in which the rights and dignity of all people have been upheld.
In just a week, what progress we have made! Recall:
- The Supreme Court upheld the legal right of all people to marriage, overcoming centuries of discrimination against same sex couples.
- The Court also affirmed the Affordable Care Act that offers health care to most Americans – ensuring the millions now covered by health insurance will continue to receive coverage.
- Republican leaders in the Senate and House worked with President Obama to give the president the ability to ratify free trade agreements, including the Trans-Pacific Partnership.
- The President spoke for all Americans as he preached on grace, then captured a unifying moment in Charleston and across the country as he sang “Amazing Grace” at Emanuel AME church.
- Americans banded together to ask that the Confederate flag be taken down – 150 years after the end of the Civil War.
- The Gates Foundation announced it will invest $2 billion in breakthrough renewable energy projects.
For socially progressive, fiscally conservative people like myself, these are signs of genuine progress that our country is getting back on the right track, attempting to heal some of our historic wounds and bring the country together, so we can focus on growth and opportunities for all Americans to live healthy and prosperous lives.
In each case, leaders made the difference by acting with courage and listening to their conscience. Kudos to:
- Justice Anthony Kennedy who wrote the majority opinion on marriage equality.
- Chief Justice John Roberts who wrote the majority opinion upholding the Affordable Care Act.
- Speaker John Boehner, Leader Mitch McConnell, and President Obama for uniting forces against the Democrats and labor unions to bring the benefits of free trade to all Americans.
- South Carolina Governor Nikki Haley, four living former South Carolina governors, and the South Carolina congressional delegation who unified to urge the Confederate flag be removed from the South Carolina statehouse.
- Bill Gates for his focused philanthropy and for encouraging others to join him and Warren Buffett in The Giving Pledge to give away 50% or more of their net worth.
It is pioneering leaders like these and many others who are making the difference in our country, in large ways and small.
Finally, on a personal note, at a gathering in Minneapolis, Hillary Clinton praised the George Family Foundation for the work of its Catalyst Initiative to address “toxic stress” in underprivileged communities through mind-body approaches to health. My wife Penny George’s visionary leadership in integrative health is enabling people to achieve health in mind, body, and spirit. Penny continues to inspire and amaze me.
Target's CEO, Brian Cornell, is no stranger to difficult decisions.
In 1981, Cornell stood in his UCLA dorm room, struggling with the biggest choice of his life. He could attend his college graduation, or he could fly to London to chase the girl who had "absolutely stolen his heart."
Thirty-four years later, Cornell faced another difficult decision. While dining with CVS CEO Larry Merlo, he and Merlo hatched a plan to sell Target's pharmacies and its in-store clinics to CVS.
In both cases, he made the decision to choose the important over the immediate.
The partnership with CVS represents yet another opportunity for Target to build its business. The transaction frees up resources for growth priorities — wellness and healthy foods, e-commerce, and new store formats like Target Express, small stores near college campuses and in urban areas. The move will also bring more guests to Target stores as CVS owns Caremark, a pharmacy benefits manager with over 70 million users.
Since taking the helm just ten months ago, Cornell has moved quickly to enable Target to regain its mojo, which had steadily slipped away in the past five years. He did so by making hard choices and refocusing the company on its roots that gave it the cache to be known among guests as Tar-Jay.
When Cornell took over, Target was not in good shape. Since 2007, the percent of Americans who say they've visited a Target store in the past four weeks has dropped by 30 percent, according to Kantar Retail. Its thrust into food was achieving mixed results; its long overdue e-commerce initiative was cumbersome to use; and its expansion into Canada was failing, as that division had lost $2 billion since opening in 2011. Then in December, 2013, the Target data breach burst into the open, affecting up to 70 million of its credit-card users.
Facing these difficult challenges, Cornell wasted no time in putting them behind him. After spending his first month touring stores, he announced that Target would focus on four key categories: fashion, kids, babies and wellness. Recognizing that Target's headquarters staff had become bloated, he slashed 2,300 positions. And he ventured into London to recruit Tesco's Mike McNamara as CIO, giving him a broad portfolio that includes Target's digital platform, information security, and its omnichannel strategy.
Cornell's toughest decision came last January. After visiting several of Target's Canadian stores, he announced the liquidation of the Canadian division, closing all 133 stores. I realized what courage he had not to throw good money after bad, and to reinvest south of the border. He described the decision as "the toughest of my career."
Hard decisions like these characterize great leaders. They build upon their company's roots and its strengths, and don't try to do it all. As my Harvard Business School colleague Michael Porter teaches, "Strategy is all about choices and deciding what not to do." That's precisely what Cornell has done at Target.
Freeing up investment dollars is enabling him to sharpen merchandising in focus categories, expand Target's presence in urban areas with TargetExpress, and invest $1 billion in Target's digital platform.
These moves are also enhancing Target's same-store sales and profitability. Since Cornell took over last August, Target stock is up 40 percent, while rival Wal-Mart has declined 4 percent. As Target's first CEO to come from outside ranks, Cornell is reaching out to the local community, vowing to continue Target's policy of giving 5 percent of its pre-tax income to philanthropic causes.
For Cornell, "It's all about people." Upon arriving at Target, he moved from the 26th floor CEO corner suite to a smaller office down the hall. He then moved the majority of the executive team to the 26th floor to make communication easier.
Brian Cornell has hit nothing but bull's-eyes in the past year.
And the girl he chased in 1981? He and Martha have been married for twenty-five years.
Commentary by Bill George, a senior fellow at Harvard Business School and the former chair and CEO of Medtronic. He is the author of the book "True North." Follow him on Twitter @Bill_George.
Disclosure: Bill George does not own any of shares of Target or any other companies mentioned here, nor does have any other business relationships with them.
By Maureen Milford, The News Journal, May 14, 2015:
To du Pont family member Tatiana Copeland, the DuPont Co.'s chief executive, Ellen Kullman, emerged Wednesday as "the hero of America."
"She's the female John Wayne," Copeland said of Kullman after the company's annual meeting, where DuPont beat back activist investor Nelson Peltz and his Trian Fund Management in its bid to get four seats on the company's board.
"She didn't flinch."
Copeland is not alone in her opinion. Following DuPont's victory Wednesday, some investors, academics and businesspeople said the struggle went far beyond DuPont. Now, Kullman and the board have set a standard for companies facing future proxy wars, they said.
"Everyone was watching it. This was a seminal test," said Bill George, former chief executive of Medtronic and a director of Exxon Mobil and Goldman Sachs. "It's a much bigger battle between advocates of short-term returns and believers in the long-term value creation for employees, customers, community and shareholders."
The way George sees it, the DuPont win over Trian was an example of a corporate CEO and board not being intimidated when an activist investor tried to push its way into board seats. Now, a "playbook" has been created for other corporate leaders to follow, he said.
"I think people will think twice before anyone runs a proxy contest against a capable CEO doing the right things with a clear strategy and a strong board," he said.
Jeffrey Sonnenfeld, senior associate dean for leadership studies at Yale School of Management, said Kullman showed other corporate leaders how to "take on an activist."
"She never stooped to the mud-throwing. There were no personal invectives. She took the high road and said, 'Here's the truth. Here's the facts,' " Sonnenfeld said.
To Sonnenfeld, the DuPont victory has done three things in corporate America: It will fortify the courage of corporate leaders who have strong performance records; it will embolden boards and CEOs to hold their ground and not capitulate when unfairly under attack by activist investors; and it will discourage activist investors and proxy rating firms from "using reckless bravado."
"Activists still have a role to play. They should focus on the facts and not ad hominem attacks," he said.
Lawrence Hamermesh, professor of corporate and business law at Widener Delaware Law School, said it's possible to overestimate the impact of the DuPont proxy contest as a model for corporate America. Peltz is a serious investor who has made a large investment and is not a quick in-and-out activist, Hamermesh said.
"DuPont's win depended on the fact that [Kullman] and her team have already done a lot of things to show they're responsive to investor concerns," Hamermesh said. "You don't get CalPERS [California Public Employees Retirement System] to support you by ignoring investor interests."
George said he believes this battle was about more than money to Kullman.
"She's not doing this for herself," George said. "She bleeds DuPont red."
Brien Jamison, Kullman's brother, agreed. He said his sister put her "heart and soul" into the battle.
"I think it drained her emotionally," Jamison said.
Former DuPont Chief Executive Edgar S. Woolard Jr., the former Apple Computer Inc. board chairman credited with helping to bring Steve Jobs back to that company, called the proxy victory "a great job done by the DuPont team."
"I always knew they would win," he said.
Copeland, whose father-in-law was the last du Pont family member to head the company and once was the largest single stockholder, said shareholders issued a clear vote of confidence for Kullman and should help her move forward with the company's initiatives. Copeland said she and her husband, Gerret, continue to own "a lot" of DuPont stock but declined to say the amount.
Many experts believe individual investors like the Copelands helped push Kullman and DuPont to victory. Following the announcement detailing the results of the voting, the roughly 400 shareholders in attendance at DuPont's new corporate headquarters at Chestnut Run stood and applauded long and loud.
"That's when I saw Ellen crack a little smile," Copeland said.
In a press conference following the annual meeting, Kullman behaved as if it was just another working day and appeared to take the win against Peltz in stride. She emphasized that employees "during this period have been phenomenal, focusing on the business, focusing on our customers, on innovation, continuing to make progress out in the marketplace."
"I'm very proud of my board. They are a board that continues to raise the bar. They are a board that continues to engage with management and yet this took it to another level in terms of telling our story with shareholders, as well," she said.
She acknowledged that individual – or so-called retail – investors "normally don't vote as often as they should." Retail investors represent about a third of the company, she said.
"But apparently we got their attention this time, and they were very active in that. I think that's unusual for a company to have a large retail section so I do think they were helpful because normally they're supportive of management," she said.
Kullman's first cousin, Sharon Baker, whose mother owns DuPont stock and whose late father worked for the company, said she emailed Kullman Wednesday morning with a "Go get 'em."
To Baker, the vote is "a huge victory and for all the right reasons."
"It's wonderful to know that bullies don't always get their way," Baker said.
Kullman, 59, grew up in suburban Wilmington and attended the private Tower Hill School. Members of her large, extended family had business dealings with DuPont since the 19th century.
Jim Horty, vice president of Commonwealth Trust Co., whose family has been friends with Kullman's family for generations, said the DuPont win "is good for Delaware, good for the employees, good for the retirees, good for the stockholders and good for the community."
"I think there are a lot of CEOs that think it's about time someone took these activist investors on – and she took 'em on big time," Horty said.
Shareholder Nelson Fernandez of Allentown, Pennsylvania, who did not work for DuPont, was all smiles after the vote.
"We're not a fan of what we see Nelson Peltz do," Fernandez said.
From CNBC, Posted May 14, 2015
In the seminal proxy contest of the year, DuPont CEO Ellen Kullman and her board prevailed over an aggressive attack by activist investor Nelson Peltz and his Trian Fund, who nominated himself and three other directors. The re-election of all 12 members of the DuPont board is a significant victory for long-term investors who supported Kullman's transformation of this 212-year-old company, one of America's crown jewels of science and innovation.
In an era of growing focus on near-term gains, the proxy contest raised an important issue: could an activist investor holding less than 3 percent of the company's shares prevail over a highly successful management team overseen by a united and prestigious board?
In recent years, activist investors have been gaining support. Actively-managed funds that are struggling to beat index funds in order to justify their much higher fees have been voting for the activists. Support for the activists from the media and academic circles has been growing as well. In today's shareholder vote, the majority of DuPont shareholders backed continuation of Kullman's leadership and her strategy that is transforming DuPont and creating great results in the market. The wisdom of long-term investors prevailed as they ignored the proxy-advisory services and made their own decisions to vote for the DuPont board and Kullman.
This proxy contest also reflected the shifting focus of activists to challenge highly successful companies like Apple, Amgen, Allergan, PepsiCo, eBay and DuPont, rather than attempting to go after poor performers that lack clear strategies. Perhaps the activists learned the pitfalls of attempting to transform these poor performers from Bill Ackman's enormous losses incurred in trying to run J.C. Penney. On the other hand, they may feel there is little downside to investing in these top performing companies.
Whatever the reason, Kullman's tenacity may cause activists to think twice about starting a proxy contest against well-run companies led by successful CEOs with capable boards. Let's hope so, as these fights are enormously distracting for both the management and the board. In Peltz's case nothing was contributed that wasn't already being done by Kullman in leading the transformation of DuPont.
I support activist investors who work quietly with managements and board to improve struggling companies. Such was the case with Jeff Ubben of ValueAct in encouraging Satya Nadella's replacement of Steve Ballmer as CEO of Microsoft, and Ralph Whitworth of Relational Investors in encouraging Home Depot to replace Bob Nardelli with Frank Blake. As chair of Hewlett-Packard, Whitworth skillfully led Meg Whitman and the H-P board to split the company into a hardware company and a systems/software company. The contributions of these behind-the-scenes activists are already apparent in these companies. But their strategies are vastly different than the very public attacks on successful companies that other investors have waged. Peltz's defeat could be the Waterloo of the latter, as more CEOs may be emboldened not to capitulate to their bullying tactics.
The defeat of Trian's nominees also reflects the waning influence of the proxy advisory services like ISS and Glass Lewis, both of whom supported Peltz and his slate. Today the leading institutional investors have formed committees that carefully weigh the pros and cons of each side's arguments and reach their own conclusions. This is all for the better. Unlike the advisory services who hold no shares in these companies, institutional investors have a large stake in their long-term success, as well as a fiduciary duty to vote their shares in the best interests of the actual owners of the stock. Not being short-term traders, they have to live with the long-term consequences of their decisions.
There is also a growing recognition from institutional investors that all the great value-creating companies of the last 25 years are led by CEOs and boards with long-term visions and strategies. Hence, companies like Berkshire-Hathaway, Wal-Mart, Intel, IBM, FedEx, Microsoft, Genentech, Amgen, Medtronic and Exxon give their owners consistently strong gains, and are now being followed by newer companies like Apple, Google, Starbucks, Amazon, and Facebook. But reaping the rewards requires long-term investments that pay off over decades.
In the end, however, the success of DuPont over Trian comes down to one exceptional and highly authentic leader: Ellen Kullman. A 27-year veteran of DuPont who was raised in Wilmington, she has repeatedly demonstrated the vision and the courage to transform one of America's greatest companies into a highly competitive specialty chemicals firm that can compete effectively on the world stage. In the face of withering attacks and enormous pressure to change course, Kullman did not deviate from her True North. In the end, she deserved to prevail.
The sub-title in Saturday’s New York Times op-ed by Joe Nocera jumped off the page, “Why shareholder value has become a disaster for the country.” Nocera was writing about the seminal proxy fight that will be settled on Wednesday, May 13, at DuPont’s annual meeting.
On one side is the DuPont board of directors, one of the most distinguished of any U.S. corporation, which recommends the re-election of its 12 members. On the other is the activist investor Trian Fund that proposes a new slate of directors, led by Trian CEO Nelson Peltz, to replace four current DuPont directors.
The two strategies for the company could not be more different. The DuPont board proposes to complete the divestiture of its performance chemicals business into a new company, Chemours, and concentrate on its three high growth, high margin businesses: agriculture & nutrition, advanced materials and bio-based industrials, all anchored by DuPont’s famed central research laboratories. Trian and Peltz, on the other hand, have contemplated separating DuPont into three companies and eliminating central research, which spends just $220 million per year (0.7% of sales).
Outside activists play a useful role when they recommend transformation to poor management teams at under-performing companies. At DuPont, CEO Ellen Kullman is an outstanding executive running a high-performing company. Upon her election to CEO in 2009, she immediately began to streamline DuPont and transform it into a competitive chemicals company focusing on its high margin businesses. During her first six years, DuPont’s stock rose 266% compared with 165% for the S&P 500. Kullman has positioned the company for sustainable growth and profitability while the market has recognized the progress. Where is the need for an activist in this equation?
Trian’s proxy attack is perplexing, yet is one of a number that activist investors have launched targeting healthy companies. In his recent forays, Peltz has been successful in taking over H.J. Heinz and splitting apart Kraft. Both efforts led to mediocre results and wound up with both companies being sold to Brazilian private equity fund 3G. Meanwhile activists have also attacked many of America’s greatest companies, including Apple, Amgen, PepsiCo, Dow, Allergan, and Target. This can only make America’s business focus even more short-term – damaging the country’s long-term competitiveness.
Of great concern to me is that these activist pressures will result in significant reductions in long-term corporate performance. The playbook for many of these activists is to cut research, throttle back on new businesses, eliminate thousands of jobs, and leverage the balance sheet. These actions almost always improve the financial numbers in the next reporting period, but they weaken the long-term earning power of the company. Worse, they put the entire enterprise at risk when unpredicted events occur, such as the next economic downturn.
As a professor at Harvard, I have been an outspoken advocate of creating sustainable shareholder value by balancing near-term performance with long-term investments. The right long-term investments drive future growth and profitability. While leading Medtronic, we transformed the company into the leading medical device company and grew the company’s market capitalization from $1.1 billion to $110 billion today.
I have no problem with activist investors that challenge poorly managed companies without viable long-term strategies. Rather, I am a critic of corporate boards and executives and activists who only focus on the short-term stock price. Recently, Larry Fink, CEO of Blackrock (the world’s largest fund manager), wrote all 500 of the S&P 500 CEOs and urged them not to respond to these pressures for financial engineering and to continue to invest for their long-term futures.
Wednesday’s vote will be seminal in determining how aggressive activists will be in taking on major global corporations. Peltz and Trian have run a very effective proxy campaign for their nominees, using the media and working closely with many investors to persuade them to vote for their slate. This effort convinced both proxy advisory services, ISS and Glass-Lewis, to back all or part of its slate. DuPont, led by Kullman, has also worked extremely hard to tell its very positive story. CalPERS and the Canadian Proxy Fund recently endorsed management’s efforts. The vote appears to be extremely close, with half of the shareholder votes still not in.
Peltz has some investors asking, “What’s the harm in electing Peltz to the DuPont board?” A great deal. Peltz’s presence will not only disrupt DuPont’s long-term strategy for sustainable success, it will signal “open season” to activists launching proxy fights. If DuPont gets broken up and its central research labs shut down, it will mark the loss of a national treasure, just as it did the demise of the famed Bell Labs. Beyond that, it will give momentum to the short-term shareholder activists.
The DuPont proxy vote is a part of a battle for the soul of corporate America. The venerable Martin Lipton, quoted in Nocera’s column, has it right: this form of shareholder value is “a disaster for the country.”
From The New York Times, posted May 1, 2015
When Sherry Lansing, the former chairwoman of Paramount Pictures, decided to end a 40-year career in the rough-and-tumble of Hollywood, the question she faced was where to direct all the energy and drive that had propelled her to the top of the industry.
Lounging about in the suburbs of Los Angeles at age 60 was not going to be an option. So instead, she turned her attention to medical research — cancer research in particular, a subject that had taken hold of her years earlier when her mother died of ovarian cancer at age 64.
“For me, it’s something I always had inside of me, something I always wanted to do,” Ms. Lansing said. Acting on that passion, she started the Sherry Lansing Foundation, which funds cancer research, about 10 years ago, and is a member of the California Institute for Regenerative Medicine, which promotes stem cell research.
“They had to explain things to me and I had to learn things,” she said of the medical experts and scientific researchers with whom she began associating. “I felt young. I felt curious. Everything was new because I didn’t know,” she said. “If you keep curious, you keep young.”
Whether closing that next deal or creating that next film, high-powered executives thrive on the next big thing. Without it, some are left searching for meaning or another challenge. To that end, a growing number of Americans are creating a new phase of life, sometimes called a “third chapter.”
Often leading the way are those at the top, who typically have the most options but can also face struggle and rejection as they grapple with trying to find a meaningful role in the later years of life. Many who have achieved considerable success in one field want to reach new heights in another field.
Whether they make money or not, the most driven search out stimulating ways to live life, including new areas of work. If you have a passion for something, they say, figuring out what to do next can be easier. Yet changing the pace of life brings with it adjustments, no matter how extraordinary, or ordinary, that life may be.
“I think the most important thing is to be brave, not to be afraid of failing,” said Stephen J. Friedman, 77, who has been president of Pace University since 2007. Before that, he was dean of the Pace University Law School for three years, senior partner at the law firm Debevoise & Plimpton and a commissioner at the Securities and Exchange Commission.
“I just didn’t think of myself as an education person,” Mr. Friedman said. “I never thought I could become a law school dean.” It was actually a younger lawyer in his firm who had a doctorate in history who suggested that Mr. Friedman talk to Pace about the law school deanship, he said.
Mr. Friedman emphasized that being “comfortable when you are on a learning curve” is at the core of making transitions. You must “have the confidence that you can get to the point reasonably quickly where you know enough,” he said, even if you are missing some of the context. “A lot of people are afraid of that, of being in a situation where they don’t have the full context, and saying the occasional stupid thing.”
Therein lies the satisfaction of beginning anew later in life. “We’re looking for new meaning and purpose,” said Jeri Sedlar, co-author with her husband, Rick Miners, of the book “Don’t Retire, Rewire!” She is also a personal transition guide who ran an executive search firm. “Do your planning in advance so you won’t get blocked out of something.” Ask yourself, if you had infinite time and money, what would you want to do? “Write these things down,” Ms. Sedlar said. “Start to look now.” What does it take to get there?
Those who have had high-level careers can be role models for others who are 60 or 65, as well as for those who are much younger.
Joseph McInerney, who was president and chief executive of the American Hotel & Lodging Association in Washington for 12 years, until September 2013 — after years of private sector leadership roles in the hospitality industry — is developing another chapter. He continues to consult and serves on the advisory board of Attract China, which markets and promotes destinations to Chinese tourists, and other hospitality industry businesses such as the Hotel Inventory, a website for the buying and selling of hotels.
“The day you’re no longer the C.E.O., your life changes — so you have to decide what you want to do to move forward,” Mr. McInerney, 75, said. “The important thing to do is network with all your connections. I started talking to a lot of different people and opportunities arose.”
Mr. McInerney, who also was chief executive of the Pacific Asia Travel Association for four years, based in Bangkok, is leading a training program for the World Bank for the Municipal Development Fund of Georgia in the former Soviet Union. The program’s mission is to train hotel and restaurant workers, tour guides and retail wine clerks in customer service skills. “I enjoy going to work,” he said. “I’m not making a lot of money but I’m having a lot of fun making a difference in people’s lives.”
Many who have had high-powered careers look for opportunities to help others, particularly in guiding the next generation. Sometimes they find advisory roles for themselves in start-up companies, other times they teach at the highest level, write books and serve on the board of major corporations.
Bill George, the retired chief executive of Medtronic, the medical device company, finds nurturing and mentoring the next generation of leaders brings significant meaning to his life. The author of several books, including “Authentic Leadership: Rediscovering the Secrets to Creating Lasting Value,” Mr. George is on the board of the Advanced Leadership Initiative at Harvard, and serves on the board of more than one company.
In his 70s, Mr. George finds satisfaction interacting with people who are “doing challenging work,” and derives “vicarious pleasure in their success,” he said. In addition, “becoming a learner” later in life brings additional satisfaction when you are “no longer carrying the organization’s responsibility.”
John Seffrin, who was C.E.O. of the American Cancer Society for 23 years, has a plan for the next part of his life. In an interview just days before he retired on Friday, Mr. Seffrin, 70, kept returning to the same theme: battling cancer as a major public health problem.
“We can make this cancer’s last century,” he said.
As he leaves his current position, Mr. Seffrin expects to go through a period of change. “It’s a transition,” he said. He already has some teaching opportunities he is considering, having spent two decades in academia earlier in his career at Indiana University. “I might become a consultant, do some teaching,” he said.
As a chief executive, “real work-play balance is not possible,” Mr. Seffrin said. Instead, he said, the answer has been “finding play in your work when you have to work all the time.”
Mr. Seffrin recommends finding, or in his case having, a mission when you retire: “You need to find a way in which you are committed to something other than your ordinary self.” In short, he said, find a role in which you are making a difference in this world, and that’s what he intends to do. He is passionate about battling cancer as a public health problem. One of his grandmothers and his mother died of cancer. His wife is a breast cancer survivor.
Looking ahead, Mr. Seffrin spoke about anticipating becoming a grandfather this month for the first time. In fact, those in high-level careers often spoke of a desire to deepen relationships with family and other loved ones.
“Sixty is young enough for a whole third chapter,” Ms. Lansing said. “I didn’t dislike my job, but I had done what I set out to accomplish. I didn’t have the same passion for it. I wanted a whole new chapter. In terms of my life, too, I wanted a different kind of life, where I could actually be on vacation and stay another day.”
She added: “I used to read scripts during a concert. I loved it at the time. There is a season for everything. You need to be interested and curious until the day that you die.”
From The New York Times DealBook, April 9, 2015
Since its founding in 1802, DuPont has been at the center of American scientific breakthroughs in chemistry. Among its research triumphs was the black powder that supplied 40 percent of the Allied needs in World War II.
In 1912, DuPont founded the first industrial science labs in the United States. Since then, the company has produced a remarkable number of innovations that have had wide-ranging and long-lasting effects on society. These include DuPont’s patented chemicals like rayon in 1924, Teflon in 1938, Kevlar in 1965 and Solamet solar cells in 2007.
Today, DuPont is facing an activist attack from Nelson Peltz. His Trian Fund seeks to replace four DuPont board members with Mr. Peltz and three other candidates.
Mr. Peltz has openly declared that his goal is to shut down DuPont’s central research labs and split the company into three parts — moves that would directly dilute scientific progress that DuPont has worked to develop.
DuPont is just the latest victim of Mr. Peltz’s boardroom assaults. In 2012, he persuaded Kraft’s chief executive at the time, Irene Rosenfeld, to abandon its global marketing by spinning off its North American food business and renaming the international company Mondelez. Since the separation, both companies have seen their revenues and profits largely decline or remain stagnant. In the wake of weak financial results, Kraft’s board agreed to sell the company last month to the Brazilian private equityfirm 3G to be merged into Heinz.
In mid-2013, Mr. Peltz attacked PepsiCo, trying to force it to buy Mondelez, combine it with PepsiCo’s Frito-Lay business, and break the company in two: beverages and foods. PepsiCo’s chief executive, Indra Nooyi, with the full support of her board, strongly opposed Mr. Peltz’s financially driven plan. Ms. Nooyi’s strategy flourished as she significantly outperformed archrival Coke. Gaining little traction, Mr. Peltz backed off this year.
Mr. Peltz’s latest attack on DuPont is especially peculiar given its current management. Since becoming chief executive in January 2009, Ellen Kullman has done everything an activist might propose. She has reshaped the company’s portfolio to focus on its high-growth, high-margin businesses.
First, DuPont sold its performance coatings business to the Carlyle Group. Now, it is spinning off its performance chemicals business as Chemours, providing DuPont shareholders a one-time cash dividend of $4 billion.
These moves provide a clear strategic focus in three high-tech businesses: advanced materials, bio-based industrials, and agriculture and nutrition. DuPont has used its central research labs to support all its businesses, providing the breakthroughs that have spurred their growth.
In 2014 alone, $9 billion of DuPont revenue, or 32 percent, came from internal innovations. Without the steady stream of scientific breakthroughs coming from its central research labs, where will DuPont’s future revenue come from?
The Peltz proposal is troubling because it mirrors a disturbing trend in which financiers are gutting American research labs that develop tomorrow’s innovations. In reality, they want to increase short-term earnings, see an uplift in the stock price and close out their positions. They are speculators, not investors.
When a hotel chain increases its short-run profit by neglecting to make necessary repairs, customers eventually stop coming to stay in dilapidated rooms. Similarly, for science-driven companies like DuPont, research and development is at the heart of their growth. Today’s investments lead to tomorrow’s breakthroughs and profits. Cutting R.&D. investments that create innovative new products will leave these companies lagging global competition in years to come.
From time to time, investors conveniently ignore this fundamental business law. Financial engineers convince managers that they can generate short-term gains and not worry about the future. Allergan, which increased shareholder value 29 times in 16 years, was forced by Valeant to sell to Actavis this year to avoid being dismantled.
The pharmaceutical giant Pfizer has openly declared it is moving away from basic science. IBM has cut R.&D. the last several years.
This rarely ends well. Without new products from R.&D., all of them will struggle.
DuPont currently has a strong, independent board that includes 10 current or former chief executives, chief financial officers or chief operating officers — many of whom have deep scientific and regulatory knowledge.
What then is the basis for replacing four of these directors with nominees loyal to Mr. Peltz? Among those Mr. Peltz seeks to replace is DuPont’s lead director, Alexander M. Cutler, who is chairman and chief executive of the Eaton Corporation and a highly regarded corporate leader.
In reality, all that seems to matter to Mr. Peltz is a higher stock price so he can make some money, close out his position and let others pick up the pieces.
In contrast, DuPont’s chief, Ms. Kullman, is making all the right moves for the company’s customers, employees and shareholders. During her first six years at the helm, DuPont provided a total return to shareholders of 266 percent with more than $13 billion in dividends and stock buybacks to its shareholders. Ms. Kullman’s results far exceed the Standard & Poor’s 500 index and Mr. Peltz’s own Trian Fund.
It’s time for DuPont shareholders to give Ms. Kullman a resounding vote of confidence at DuPont’s annual meeting, scheduled for May 13. If they don’t, one of America’s great science companies will be at risk.
Laws being passed this past week by Indiana and Arkansas to make discrimination legal on basis of religious freedom have stirred up a hornet’s nest of protests across the country, causing the Republican governors of these two states to ask that the legislation be modified.
While LGBT obviously oppose these laws, many of the most criticism has come from CEOs of the nation’s leading companies. Last Sunday, Apple CEO Tim Cook led off the debate when he penned a powerful op-ed decrying Indiana’s religious freedom law. His decision to speak out was not without risk. Apple products exist in 76 countries where homosexuality is illegal. He wrote:
“On behalf of Apple, I’m standing up to oppose this new wave of legislation… regardless of what the law might allow in Indiana or Arkansas, Apple will never tolerate discrimination.”
Other CEOs, wary of similar risk, might have avoided the debate. In the past they have been reluctant to engage in these discussions, for fear of being criticized by their customers and employees, especially those who are evangelical Christians. The business response could have begun and ended with Apple.
But not this time.
In the past week, CEOs Doug McMillon of Walmart, Arne Sorenson of Marriott (a Mormon-founded company), Marc Benioff of Salesforce, and John Lechleiter of Eli Lilly (based in Indiana) have come out vigorously against similar laws. Walmart’s McMillon tweeted about a similar law being considered in Arkansas,
“Every day, in our stores, we see firsthand the benefits diversity and inclusion have on our associates, customers and communities we serve. For these reasons, we are asking Governor Hutchinson to veto this legislation.”
A few years ago, such public protest would have been surprising. For five years, I sat next to Lord John Browne, then chief executive of British Petroleum (BP), as we served together on the Goldman Sachs board. Browne is gay, yet this was a subject we never discussed. As he wrote in his poignant 2014 book, The Glass Closet, “My refusal to acknowledge my sexual orientation publicly stemmed from a lack of confidence… It is difficult to feel good about yourself when you are embarrassed to show who you actually are.”
Increasingly authenticity is seen as the gold standard for leadership. Fortunately, we see more courageous CEOs – willing to take stands for what they believe and for the diversity of their employees. Now, more than ever, it is essential our society treat everyone equally regardless of religion, national origin, race, or sexual preference.
Discrimination for any reason gives a rationale for all forms of discrimination. If the law permits business owners to discriminate against gays based on their religious views, what prevents them from discriminating against Muslims or Indians?
I know firsthand that wading into these debates has its downsides. As CEO of Medtronic in 2000, I spoke out against the Boys Scouts’ decision to prevent gay scouts from joining their ranks. I also supported the Medtronic Foundation’s decision to withhold grants to the Scouts because the Foundation does not fund organizations that discriminate for any reason. I received a lot of criticism from evangelical Christians and former Scouts among Medtronic employees, but it was worth it. Eventually, the local chapters amended their policies to accept all boys regardless of sexual preference, and years later the national organization followed suit.
It is encouraging that CEOs have taken an active role in this debate. But they can’t do it alone. Leaders from all walks of life, from government officials to civic leaders, need to embrace diversity in all forms. Speaking publicly against discrimination is the first step in that process.
As Tim Cook wrote in his op-ed, “Men and women have fought and died fighting to protect our country’s founding principles of freedom and equality. We owe it to them, to each other and to our future to continue to fight with our words and our actions to make sure we protect those ideals.”
To the CEOs who have already spoken out, thank you. Your voices are powerful, and have already forced the states of Indiana and Arkansas to amend their laws. As this national debate shows, there is much work left to do for Americans to accept all people as being equal under the law.
Here’s an important article from my former colleague Jeff Sonnenfeld, who demonstrates that returns from activist funds are less than 50% of the S&P 500, and result in dismantling some formerly great companies. DuPont, in particular, does not deserve the kind of activist proxy attack Nelson Peltz is waging. It is a great company that is well run by CEO Ellen Kullman.
From Wall Street Journal, “Activist Shareholders, Sluggish Performance,” posted April 1, 2015.
For all the talk about activist shareholders—usually large hedge funds—getting seats on company boards and pushing to make strategic, value-enhancing changes, these activists haven’t fared especially well. Investing in index funds would have yielded better returns over the past few years than most activist funds.
How much better? In 2013 the HFR Activist index posted a total return of 16%, less than half the S&P 500 Index’s total return of 32.4%. In 2014 the HFR Activist Index saw returns of 4.8%, far below the S&P 500’s 13.7%.
Contrary to their rhetoric, many activist investors lack the Midas touch. Their recent returns may exceed the performance of other hedge funds, but they still lag behind the broader market. Ironically, the major companies targeted today, including Apple, PepsiCo, Dell, Dow and DuPont, generally deliver returns that soar above that of activist funds.
Some funds, such as Third Point, Relational Investors, Starboard Value and TPG-Axon Capital, have driven constructive outcomes at Yahoo, Office Depot, Hewlett-Packard, Home Depot and SandRidge Energy. Yet too often activists pressure companies to cut costs, add debt, sell divisions and increase share repurchases, rather than invest in jobs, R&D and growth.
They do all this in the name of creating shareholder value. But that value is often short-lived and sometimes comes at the expense of long-term success, if not survival. Despite Carl Icahn’s successes—such as Chesapeake Energy (Netflix and Apple were great investments but they resisted his advice)—his overlooked failures include TWA, WCI Communities, Blockbuster and Dynegy, all of which are either out of business or have filed for bankruptcy.
Nelson Peltz’s Trian Fund Management and its activist assaults on the Bank of New York, PepsiCo and DuPont are an interesting case in point. Trian delivered only an 8.8% return in 2014, nearly five percentage points below the S&P 500. In 2012 Trian was up a scant 0.9% while the S&P 500 was up 15.9%. Clearly, this undermines Mr. Peltz’s argument that DuPont’s board needs Trian and Mr. Peltz to drive better returns.
Five of the 11 companies where Trian has a seat on the board underperformed the S&P 500 between the time Trian got its seat and the end of last year—Wendy’s, Legg Mason, Mondelez International, Family Dollar and Chemtura, which went bankrupt in 2009 after two years of Trian board involvement. Contrast these companies with State Street, which rejected Trian’s breakup and board-seat demands and has handsomely outperformed the S&P 500 (129.5% to 80.5%) over the past four years—without Trian’s help.
Even better returns were available to those who invested in companies that activists sought to topple. Suppose on Jan. 1, 2010, you put $100 each in DuPont, an S&P 500 mutual fund and Trian. Your investment in DuPont would be worth roughly $240 today. Your S&P 500 fund would be worth roughly $200. And your investment in Trian would we worth roughly $190. DuPont’s returns handily beat those of Trian in 2010, 2012 and 2014.
Mr. Peltz now is waging a costly, distracting proxy battle to break up DuPont to deliver short-term gains while demanding he personally have a seat on the company’s board. This despite Trian’s poor showing versus DuPont and the latter’s recent hiring of two new directors, Edward Breen and James Gallogly, two former CEOs and tough industrialists whom Mr. Peltz unsuccessfully solicited in 2014 to serve on Trian’s board of directors.
Given DuPont CEO Ellen Kullman’s success since taking the reins in 2009, it’s not surprising that Trian’s assault has been thwarted. Nevertheless, DuPont has offered to accept a current Trian board nominee—other than Mr. Peltz—out of respect for Trian’s 3% stake.
As Securities and Exchange Commission Chairman Mary Jo White said in a March 19 speech at Tulane University’s Corporate Law Institute: “Reflexively painting all activism negatively is... using too broad a brush and indeed is counterproductive.” Activists and their target companies, she said, should “step away from gamesmanship and inflammatory rhetoric that can harm companies and shareholders alike.”
But with activist funds now boasting $120 billion under management—up 30% in the past year—there is no harm in asking what their own investors are getting back. The most aggressive activists court governance advocates and state pension funds with costly media campaigns against target companies that, paradoxically, outperform them. Perhaps they should be more active in raising their own shareholder value.
Mr. Sonnenfeld is a professor of management and senior associate dean of leadership studies at the Yale School of Management.