GPW: Stars of '07

Global ProxyWatch recently named Eric Jackson as one of its "Stars '07"...

Stars ‘07

Each December GPW names 10 people who did most to advance international corporate governance and shareowner value in the previous year. Here is the 2007 ‘GPW 10’:

Phil Armstrong, executive director of the Global Corporate Governance Forum, has kicked the World Bank-based group into high gear, producing a fleet of practical resources to fuel governance change in emerging markets.

Peggy Foran, Pfizer’s senior VP for corporate governance, associate general counsel and corporate secretary, engineered a successful format for board-shareowner communication. Kudos also to her boss, CEO Jeff Kindler, and lead director Constance Horner.

Barney Frank, Massachusetts congressman and chair of the US House Financial Services Committee, shepherded ‘say on pay’ legislation and kept pressure on reluctant regulators to protect shareowner rights.

Eric Jackson, a Florida-based consultant, pioneered a strikingly potent new form of grassroots Internet activism at Yahoo and Motorola. Expect the model to spread.

Yuji Kage, managing director of Japan’s Pension Fund Association, has worked against the odds to strengthen the group’s voice for corporate and fund accountability, both at home and abroad.

Claude Lamoureux, before retiring as CEO of the Ontario Teachers Pension Plan, led a bold purchase of global proxy advisor Glass Lewis. The takeover has the potential to alter the governance industry.

Peter Montagnon, investment affairs chief at the Association of British Insurers, led the International Corporate Governance Network (ICGN)’s drive to produce first-ever global fund governance guidelines. Montagnon now chairs the ICGN.

Annette Nazareth, as a commissioner of the US Securities and Exchange Commission, fought a losing, last-stand battle for shareowner rights to nominate directors to corporate boards. Her valedictory speech may become a rallying cry for investors.

Anita Skipper, corporate governance chief at Morley Fund Management, has taken the chair of the Global Investors Governance Network and leads an influential Morley team.

Sir David Tweedie, chair of the International Accounting Standards Board, spent the year steering capital markets closer than ever to common International Financial Reporting Standards.

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NY Times DealBook: Tallying Activists’ Victories in 2007

From the NY Times' DealBook:

December 6, 2007, 4:42 pm

Shareholder activists have been unusually vocal this year. But that doesn’t mean they’ve been more successful, a new report by Thomson Financial finds.

This year about 39 percent of all shareholder-company disputes were settled in activists’ favor. By comparison, companies prevailed about 20 percent of the time (the jury is still out on 30 percent of the disputes, which are awaiting board votes are legal decisions). In comparison, between 2001 and 2006, activists’ demands were met in 45 percent of such disputes, while companies successfully held their own just 15 percent of the time.

Still there were several notable instances in which shareholders spurred important change. British hedge fund TCI, which indirectly triggered the $101 billion sale of Dutch bank ABN Amro, is a notable example. Just days after that fund called for ABN Amro to sell assets or seek a merger, the bank’s executives began discussing a possible merger with Barclays. A consortium led by the Royal Bank of Scotland eventually won the bidding war for ABN Amro, and that deal ranks among the top five largest of all time.

At the other end of the investor spectrum, small-time Yahoo investor Eric Jackson — perhaps an unlikely mover-and-shaker — led an online campaign against former Yahoo chief executive Terry Semel that stirred up enough support to secure Mr. Semel’s resignation.

Hedge funds and private equity firms were still the “most active” shareholder activists this year, but Mr. Jackson’s stand is indicative of a new trend in which private investors and mutual funds have become increasing vocal investors.

Carl Icahn was also at the ramparts of several high-profile activist vs. company disputes this year. He was involved in about ten percent of all shareholder agitations this year—more than any other single activist, firm, or fund. Mr. Icahn successfully imposed his agenda at three of the six companies he took on. His very public dispute with Motorola is a good example of that 50/50 track record. Mr. Icahn failed to claim a seat on the cell-phone maker’s board, but he did succeed in convincing fellow shareholders to vote chief executive Ed Zander out of a job.

Consumer discretionary companies and information technology businesses remained the most popular targets for activists this year. Companies in both sectors accounted for 46 percent of all shareholder-company disputes. However, there was evidence that the ongoing credit crunch had affected activists’ strategies. Financial and investment companies, which still hold valuable assets despite the current credit troubles, were more popular targets in 2007. Meanwhile, activist agitations at construction companies decreased markedly.

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Motorola Does Not Rule out Break-up of Company

Here's an interesting story from Reuters, covering my favorite member of the Motorola Management team (and Board): Tom Meredith. Tom's all business and is credible. He says he doesn't rule out a break-up of the company.

Interesting. Here was his reaction back on July 19th when people speculated that Ed Zander was going to be replaced. "The board is not actively looking for a new CEO.... The (BusinessWeek) story is incorrect. Our board believes we have the right strategy and the right team in place." It turns out that -- less than a week later -- the Board elevated Greg Brown to join the Board himself (on July 25th), which now in hindsight clearly shows that the Board had already decided to make the change at the top but wanted to give Brown a little more seasoning.

Of course, I still like Meredith -- and I still think he's credible. However, given this earlier statement and fact, I would say that the message of today's comment is: "We're open to offers. Step right up!" As I've said elsewhere, that's smart -- given where the company is now and where it needs to get to....

NEW YORK, Dec 6 (Reuters) - Motorola Inc (MOT.N: Quote, Profile , Research) Chief Financial Officer Tom Meredith did not rule out a break-up of the company as he affirmed the phone maker's earnings guidance for the fourth quarter on Thursday.

Asked about a recent call by activist investor Carl Icahn for Motorola to break into several units, Meredith would not rule out structural changes to the company, which has been losing market share to rivals due to a weak phone line-up.

"I believe there's every opportunity for us to create significant economic value as a whole. Does that mean other options aren't viable? Not at all," Meredith told an investor conference Webcast.

Meredith backed Motorola's forecast for fourth-quarter earnings per share from continuing operations of 12 cents to 14 cents per share. He said Motorola's mobile device unit would see sequential revenue and bottom-line improvements. (Reporting by Sinead Carew, editing by Dave Zimmerman)

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The Leadership Funnel:

By Eric Jackson

Introduction:

The “Sales Funnel” is one of the most tried and true tools in business today. For every prospect you put into the top of the funnel, only a small percentage will drop out of the bottom of the funnel as a closed sale. Unless the funnel is constantly replenished at the top, it will experience moments when no sales drop out of the bottom. Every CEO, VP of Sales, and sales rep understands the importance of constant vigilance over the funnel – or else deal with the consequences of dry spots as they go on.

Yet, most organizations approach the issue of succession planning and leadership development as if it was two weeks before the end of the quarter and they realized they needed to close some business. You could make a few calls to drum up some sales – just as you could tap the executives that are immediately closest to the position that requires a new leader – but your odds of being as successful with the last-minute approach are quite low, compared to if you had been working sales opportunities and future leaders for many weeks or years in advance of needing them.

Developing leadership benchstrength within an organization follows a process remarkably similar to that of the sales funnel. At Jackson Leadership, we call it the “Leadership Funnel”™. Just as not every prospect will turn into a closed sale, not every employee you hire into your company will be a leader – which is a blessing, as you would then have all leaders and no followers. However, unless your organization institutes a structured process – the “Leadership Funnel” – to track and develop future leaders from the lower-levels up to the executive boardroom, you are jeopardizing the continued growth and success of each division and your corporate performance overall.

In this paper, we will introduce you to the concept of the Leadership Funnel and how it can help you to instill a culture of developing leaders in your organization. We start with an example of what happens when the Leadership Funnel is not followed – the case of Michael Eisner at Disney.

Michael Eisner:

Although Oscar Wilde famously said that “all publicity is good publicity,” Michael Eisner would probably disagree. He has recently been in the news, of course, for all the wrong reasons. In March, 2004, he received one of the strongest rebukes from shareholders compared with any previous CEO in history: Forty-three percent of those shareholders withheld their votes of support for him at the Disney Annual General Meeting. Why?

The business press has been quick to point out Disney’s and Eisner’s deficiencies in the months leading up to the vote: a lagging stock price relative to Disney’s peers, the risk of becoming a takeover target (which turned out to happen, when Comcast launched an unsolicited bid a few weeks prior to the AGM), a breakdown in negotiations around distributing future motion pictures co-produced with Pixar, a falling out with Roy E. Disney and Stanley Gold and their departure from the board to canvass institutional shareholders in favor of Eisner’s ousting, declining attendance at Disney’s theme parks, ABC’s continued last place performance in network ratings, and the complaints that Disney’s board was packed with too many of Eisner’s friends.

One of the least mentioned reasons, which, ironically, might undergird the other complaints, is the matter of Disney’s persistent bleeding of senior talent. Observers have commented that this has been an issue present at Disney for at least the last decade.

Steve Burke, who used to run ABC, left to join Comcast (now Comcast Cable’s president). Paul Pressler left running Disney’s theme parks (now criticized by Roy Disney and Stanley Gold as being in disrepair) to become Gap CEO in 2002. Steven Bornstein left ABC Sports to become Chairman of the NFL. Steve Bollenbach left as CFO in 1996 to assume the role of CEO at Hilton Hotels. Richard Nanula – Bollenbach’s successor – left in 1998 to become CFO of Amgen. And who can forget Jeffrey Katzenberg’s infamous falling out with Michael Eisner in 1993 to go on to co-found Dreamworks SKG? This, of course, was followed up with Michael Ovitz’s arrival and departure (with a $100MM in severance) in less than a year based on Eisner’s selection of his best friend.

Of course, senior executives leave major corporations all the time. They are normally quickly followed up by communications department missives suggesting that such departures are the normal part of doing business and that this company’s retention rate of senior executives is higher than anyone else in the industry. Yet, why have so many senior executives fled Disney? And what has been the impact? According to one anonymous former Disney exec, explaining why ABC recently turned down the Donald Trump/Mark Burnett mega-hit “The Apprentice,” so that NBC could pick it up: "Michael [Eisner] and Bob [Iger, President of ABC,] make sure their operating executives have no real power."[1]

Such complaints and the rate of so many executive departures are rare among companies that have instituted and followed the Leadership Funnel process. We now turn to a more complete description of this process and how it helps to ensure a company’s long-term success.

The Leadership Funnel:

As mentioned in the introduction, you would be hard-pressed to find anyone in business that does not understand the Sales Funnel concept. The more opportunities you chase down, the more likely you will have a real sale fall out from your efforts. You often hear the expression: “It’s a numbers game.” As a sales rep, you know that, as long as you are tracking the steady stream of opportunities through your funnel, you will ensure consistent, high-paying commission checks for you and your family. You also know that, if you ever lose focus on all parts of the funnel, and spend too much time harvesting opportunities at the expense of continuing to fill the top, you put at risk collecting a commission check down the road.

The Leadership Funnel operates in exactly the same way. Yet, leadership is sometimes still treated as a bit of a “black art.” Most organizations do not see the direct link between developing leaders today and an immediate pay-off in terms of sales or profit growth tomorrow. Therefore, leadership development gets ignored until there is an urgent need to be filled. Most commonly, someone in senior management quits and that role must be filled immediately for the sake of continuity of that function or division. “The CFO quit, who can we get to replace her?” A quick scan of her direct reports is usually made, and probably a couple of calls to different search firms. How can you expect one of those direct reports to step up to become the best possible leader in that CFO position, if your organization has done nothing significant to that point to prepare him? It is unrealistic to expect latent leadership abilities to appear from that candidate.

The Leadership Funnel is a systematic process we follow with our clients to address this issue and ensure that there is always abundant supply of leaders growing throughout an organization. What’s more, if this process is followed religiously – up and down the organization, not just in the office of the CEO – it is going to protect against potential leaders leaving once they hit a certain point.

Keys to the Top of the Funnel:

At the top of the funnel, your concern is ensuring that enough of the people that you hire into the organization are going to be able to one day take over a leadership position. Of the total number of people that you hire, it’s likely that only 15 – 20% will be later recognized as being a “high-potential” who could, one day, assume a leadership position within the organization. The vast majority – more than 60%, if your initial hiring screens are good – of early entrants will grow to become “tried and true” contributors. They will do an excellent job in their domains with good attitudes – but they will never be interested in, nor should they be given, a promotion to a managerial or leadership position.

We normally recommend that our clients assess for leadership potential among managers at the 5 year mark of their tenure within the company. At this early-stage of their careers with your company, you want to be able to do some early handicapping, without creating an elite group versus a “passed over” group dynamic within the company. We often hear the concern expressed: what about the late bloomers? For example Jack Welch’s early years at General Electric were not particularly outstanding. At this stage, you want to be able to earmark those folks who are showing a tendency to be individually successful and who might be capable of making the transition to management. However, just because someone misses a first-cut at getting in the funnel at this stage should not preclude them from making their way in down the road – assuming that their performance merits their inclusion.

Keys to the Middle of the Funnel:

A recent study by Hewitt Associates found that 49% of senior executive respondents are within a decade of retiring. Do you have the best talented people in the middle of the funnel to take over for you and your managers in key positions, if you or they were hit by a bus this afternoon?
We recommend that high-potential candidates are assessed for their strengths and areas for improvement at the 7-year mark with the company in a Leadership Assessment. Out of this assessment, the participants receive a detailed report analyzing their strengths and weaknesses and suggesting actions they should take over the coming two years to improve their areas of weakness. All high-potentials are then put into an intensive two-year developmental plan, where they look to improve or cover-off their areas for improvements. A major part of this two-year developmental program is an assignment of a coach and a mentor from the company. They meet with the participant (separately) on a regular basis to discuss how she is progressing towards their goals.

Keys to the Bottom of the Funnel:

It’s not enough just to hire the right people and then invest in developing them. One of the by-products of instituting the Leadership Funnel throughout your organization is that you will keep your best people.

What drives good people away, like those who fled from Disney? Some CEOs believe that it’s money or the simple fact that some high-potentials will simply leave so that they can assume the top spot somewhere else. It’s usually never about compensation. If these people have risen to the top ranks of Fortune 500 firm, they are almost always fairly compensated. Therefore, it is usually the non-pecuniary aspects that figure most in their decision to bolt.

Here are some questions to ask yourself about your top direct reports to ensure you keep hold of your best and brightest at the bottom of the Leadership Funnel:

· Have you given your top leaders challenging stretch assignments that test their ability to perform? What are the most critical business problems facing the firm today? Do you have your best people working on them? While you don’t want to put one of your best lieutenants in a situation where she might be a poor fit or in an impossible situation that might tear down her confidence, you need to ensure that they are adequately challenged and solving problems that are important to the organization.

· Are you shining a light on their successes or are you hogging the spotlight? Do you mention their names when they do a stellar job on your quarterly conference calls or do you characterize it as an organizational achievement?

· Are you providing them with enough discretion to run their businesses? Many departing executives complain that the biggest reason for leaving a position was that they felt hamstrung in making some of the decisions that they saw as crucial to their division’s or the company’s future success. While some leaders clearly long to have the title “CEO,” most #2s or #3s leave because they feel their current #1s don’t give them enough rope to do what they think is best. Give them the rope they want, but ensure you hold them accountable for results as well.

· Is your company and industry growing? Many executives will jump ship when they feel that their current company has seen better days. The more attractive the external environment is, the more important it is that your company be seen as having an attractive growth curve ahead of it. If you are not growing, how can you make your current senior management team part of the solution to leading your company back to growth? Are you asking them only to be responsible for downsizing or are you also asking them to find small new ways for their divisions or functional areas to grow?

The Culture of Change and the Leadership Funnel:

I would be surprised if your organization was not going through some radical change at the moment and if your industry was not going to be very different in 5 years from how it appears today. The most common destabilizing threats include industry consolidation, introduction of new technologies, price commoditization, automation, out-sourcing, off-shoring, and larger adjacent players coming into the market. Organizations are not abstract objects; they are a collection of people and assets. Sometimes the people are the assets. Therefore, to change the organization, you need to change the people’s attitudes, skills, and behaviors and that is done through leadership – not through changing some numbers on the budget or through lay-offs.
Without an abundance of leaders, who will lead your divisions and functions through radical change?

One of the pleasant secondary benefits of adopting the Leadership Funnel throughout your organization is that it changes your culture. Everyone throughout the company starts to talk the language of “benchstrength” and building up a “complementary team” in different parts of the business. Preparing those underneath you for one day assuming your role implies that you will be moving on to a larger role within the company. That movement suggests growth and change. We find that many of our clients who have adopted the Leadership Funnel report back that tracking how they were doing with their funnel correlated with a heightened ability to deal with externally-driven or internally-driven change initiatives.

What to do on Monday Morning:

Based on what you have read in this white paper, tracking and enhancing your organization’s Leadership Funnel sounds attractive. Now, how do you put it in action? Here are some quick suggestions for Monday morning:

1. Take stock of what your funnel looks like today. Do a quick inventory of who you have today? Are you surrounded by A, B, or C players? Where are the holes in the funnel? Is there one division or functional area that is particularly weak? Why?

2. Are the right people currently in the right leadership slots? Are there certain people within your organization that are driving away those that work with them? Can they be moved into other positions or easily replaced to help stop the bleeding?

3. Do you have a method of flagging someone’s leadership potential at the top of the funnel? Leadership Assessments can help here.

4. Are you building the glue between your organization and your high-potential leaders who are currently in the middle of the funnel? Start developing a culture of seeking and rewarding talent. Instituting a Leadership Development program for these people can help here. Establishing a coaching and mentoring program for these hi-pos with others from within your organization can be the most effective tool at this stage. Stretch assignments can also be extremely effective at this point. Finally, delegation is important here. You want to ensure that they are receiving not too much or too little delegation from their managers.

5. Keep the leaders at the bottom of your funnel challenged? Now that you have made the investment in bringing along the most senior-level leaders in your organization, make sure that you keep them cared for and fed properly. Neglect and oversight at this stage can cause them to seek a situation where they are more properly recognized. Ensure that you are giving them enough discretion to implement the plans they want to, while still holding them accountable for delivering results.

Conclusion:

At Jackson Leadership, we believe that 5% of an organization’s success comes through the effective development of its strategy but 95% of its success is based on a zealous focus on the execution of that strategy. Your organization will execute when you have installed the right people in the right leadership slots and you have developed a culture of leadership development using the Leadership Funnel process. Leaders do not just appear when the organization needs it most. They must be carefully developed over the course of many years to ensure they will be able to operate at their maximum level once called on.

The best organizations understand the weaknesses, as well as the strengths, of their leaders. They then cover off these weaknesses with others who bring complementary skills. To use a basketball analogy, you can have a great point guard to lead your team, but she won’t be as effective without a big center. You need to have the full complement of skills throughout your organization.

Every organization has a Leadership Funnel, whether they are conscious of it or not. Take stock of what is in your Leadership Funnel today. If it’s empty at the top, take steps today to start to correct that imbalance, so that your organization’s success is assured for years to come.

Appendix:

Five Signs you need a Leadership Funnel:

1. You overly rely on external hires, rather than internal hires, for key management positions.

2. You have been caught off-guard with a senior-level departure within the last two years.

3. You feel as though certain division’s leadership is weak.

4. You feel uncomfortable that your organization’s performance would be adversely affected if any of your senior execs (including yourself) was hit by a bus tomorrow.

5. Although you have a few senior execs who value developing those underneath them, you do not believe that your organization has a culture of grooming those with high-potential for senior leadership positions.

Leadership Funnel Best Practices:

1. You assess for leadership potential among managers at the 5 year mark of their tenure within the company.

2. High-potential candidates are assessed for their strengths and areas for improvement at the 7-year mark with the company.

3. All high-potentials are put into an intensive two-year developmental plan, where they look to improve or cover-off their areas for improvements.

4. Internal coaches and mentors are assigned to high-potentials from within the company and they regularly meet.

5. High-potentials continue to be tracked after they graduate from their two-year developmental program and further developed.

6. The CEO backs the Leadership Funnel process, speaking out in its favor, and holds the VP of HR accountable for instituting and tracking its success.

7. The VP of HR receives buy-in and support from all division and functional heads for the successful roll-out of the Leadership Funnel process.

8. Regular communication by the VP of HR with the CEO and all senior executives on the Leadership Funnel process.

[1] Bill Carter, New York Times, March 8, 2004.

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WANTED: An Undervalued Company to Target with a Third "Plan B" Campaign

Last January, I launched a "Plan B" campaign against Yahoo! I was frustrated as the turtle's pace of change and consistent under-performance of the company in a boom-time market. I called on other Yahoo! shareholders to band together as one collective group -- hoping to have enough influence on the company as a larger activist hedge fund would, using their large stake to push the board and management for change.

We ended up as a group owning 0.2% of Yahoo!'s shares outstanding, but were able to have an impact. We drafted a "Plan B" for the company and invited input from our supporters and others through a wiki. The collective ideas were much more specific and useful than what any indiviudal could have come up with on his/her own. When management and the board rebuffed us (although they have always been polite and met with us a couple of times - to their credit), we beat the drum loudly and spoke to other large institutional shareholders asking them to vote "against" several directors at the June annual meeting (to express disapproval for the results of the company but also targeting directors who we felt were ready to move on and allow for new blood around the board table).

ISS gave us a full-page mention in their report in advance of the Annual Meeting in June and we also benefited from a lot of positive press covering the unique nature of our Internet-driven grassroots campaign to make a difference for shareholders. We raised some important questions at the Yahoo! annual meeting to the management and board.

Of course, we found out 2 months later when Yahoo! finally released the results of the vote, that each director on the Compensation Committee (Art Kern, Roy Bostock, and Ron Burkle) received at least 35% votes cast "against" them; all three still serve on the board, by the way. But all the remaining directors received historically high "against" votes (7 - 12% on average; instead of the normal 0.5 - 2%).

Terry Semel stepped down 6 days after the meeting in June and Jerry Yang was installed. Some have said he's moving too slow and not making the tough calls he needs to. I think he'll be successful in the long-term (although I too would like to see less bloat, less headcount, and more focus in Sunnyvale - and elsewhere). The company has still outperformed the S&P this year, although it pains me to look at the GOOG comparison. I think Yahoo!'s results would be far worse this year had we never acted and watched things unfold passively.

In July, I launched a 2nd "Plan B" campaign against Motorola. We received a lot more early interest and press coverage in this campaign. What helped is that -- two days after launching -- Motorola pre-annouced an abysmal Q2. (We did suspect it would happen, hence the timing of our announcement.) We also got tremendous input on the wiki for our Motorola "Plan B." I can't be certain, but it appeared we got huge input from current and ex-Motorola employees. That also happened in the Yahoo! campaign. It seemed that, in both situations, many people inside the companies were so upset with the organizational direction, but felt powerless to do something. If they complained up, they feared for their jobs. Lots of good people quit in those situations and strike out on their own. However, lots stay and are silent (grumbling with their co-workers in the cafeteria).

When an outsider appeared and allowed them to anonymously provide input and support for change -- which ultimately benefits workers who are also shareholders -- they jumped at it. And -- as I said before -- our outsider group was that much better informed on key issues and opportunities as a result of their support.

Last Friday, Ed Zander stepped down as CEO of Motorola. We'd called for this and several other changes there over these last 4.5 months. We are hoping that more changes consistent with our "Plan B" are forthcoming (although we said yesterday that we believe the best outcome now, given the company's situation, is a break-up).

The campaigns for change at Yahoo! and Motorola will continue. We're still shareholders wanting a positive return. We still believe these two companies have good upside. However, it's time to launch a third "Plan B" campaign.

We need to do it again: bring together passionate shareholders who believe that one company could do massively better than just keeping to the status quo. We'll work again as a virtual team. We'll let the best ideas rise to the top. We'll call on the board and management for change. We'll use our contacts with the press and large institutional investors to get our story out there and make our case for change. We can make a difference -- maybe this time more than ever.

We need your creative ideas on who should be next. There are lots of poor-performing companies out there. We need a poor-performing company where we can come up with and execute a plan for change. That's what "Plan B" is all about --> outsized positive shareholder returns in the long-term.

I look forward to hearing your thoughts in the coming days and weeks.

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Selling Motorola's Handset Business to Dell is Smart

One rumor going around in the last few days is Motorola selling its handset business to Dell -- essentially breaking itself up as Carl Icahn and I have called for.

This more would be smart. Tom Meredith has been the best performing member on MOT's Senior Leadership Team this year. The former CFO of Dell is also on the board of Motorola and is well-respected. Dell, of course, also employs the former head of MOT's handset business - Ron Garriques.

With so many quesitons about Motorola's future and the lukewarm reaction to Greg Brown's proclamation last week, I would trust Michael Dell any day to better run this business.

For Dell, though, there's value here too. What's more, it is a strategically important move to keep pace with Apple in exciting new growth areas -- areas that Dell desperately covets for its own growth.

Where do I go to tender my Motorola shares?

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Who Lit a Candle on a Slice of Peanut Butter and Toast?

Did anyone at the Yahoo!-plex on First Avenue celebrate the recent one-year anniversary of Brad Garlinghouse's (in)famous Peanut Butter Manifesto leaked to Kevin Delaney?

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The Bank of Yahoo!

We all know that every intern at Yahoo! is bestowed the title of VP -- much like any good, upstanding bank.

My question is: which is higher at Yahoo!... an SVP or an EVP? Or are they fairly equal... could be a new Yahoo! innovation to bring egalitarianism to the corporate world? In others words, who's more of a luminary now at Yahoo!? Scott Moore or Jeff Weiner?

Breakout Performance readers.... please help clear up this age-old question once and for all.

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News from Yahoo!: Sounds good to this Yahoo! Investor

PaidContent covers the recent Yahoo! management reshuffling. Fewer silos, less bloat, more thinking about what users want? Hey, it sounds like what the doctor ordered to this Yahoo! investor....

Yahoo Interviews: Jeff Weiner, EVP & Scott Moore; SVP: Super Mass vs. Super Niche

By Staci D. Kramer - Tue 04 Dec 2007 11:10 PM PST

For a sense of how important the properties are that make up the newly constituted media group at Yahoo, (NSDQ: YHOO) consider this: more than half of the 137 million uniques visiting Yahoo sites in October—70 million or 51.2 percent—visited at least one of the media sites. (That’s an un-duplicated ComScore (NSDQ: SCOR) number provided by Yahoo PR at my request.) And for a sense of mission consider this: it isn’t enough. That’s why Scott Moore, whose news, sports and finance sites already are the kind of “starting points” demanded by Yahoo’s latest strategy, has been given the entertainment properties as well. Moore reports to
Jeff Weiner, EVP of the Network division, also home of search, the front door experience, communities, e-mail, and more. I spoke with the two separately by phone following the official announcement of the changes. Lots more after the jump…

Timing: Why now? Weiner: “I think it’s very consistent with the timing of Jerry and Sue articulating the company’s strategies and priorities.” One of the three primary objectives now: to be the leading starting point, the place people go to begin their online experience. To achieve that, Yahoo wants as many of its areas as possible to be top starting points; it’s up to Weiner’s team to deliver.

Slimfast and silos: Weiner wanted greater efficiency so the division shed product lines, reducing from 6 to 4, and broke up as many silos as possible. Also a change in approach: “We’ve historically taken more of a product approach, want to take more of a consumer approach.” That means thinking about the network experience across sites and product lines. As for media, “we want to think more holistically ... in the past, we had more silos than we liked.” He added later: “We’re increasing Scott’s span of control. He can now prioritize. ... This is the best way to leverage.” Moore: “The properties in my group are areas Yahoo has to decided to invest in to create an experience for the audience.”

Graphical media model: Trying to figure out how autos and real estate wound up with media while travel, among others, went to search? In Yahoo-speak, the media properties are based on the “graphic media model”—display advertising and increasingly video. Weiner: “It gives us an opportunity to start to create a more unified go-to-market approach in terms of those media assets.” Moore thought he might get travel, too, but it turns out that the bulk of travel’s revenue comes from transactions/listings, not display, so it went to search. Ditto for the marketplace units based on listings.

Thinking big: Moore is in the process of undoing his own ideas about creating and evolving sites, moving from a belief in niche sites like food and tech—which he launched—to the realization that Yahoo needs to think bigger—not smaller. Moore: “We couldn’t just keep launching smaller sites. We couldn’t just keep adding sites like food or tech or that kind of thing indefinitely. We need to chunk things up into larger areas.” Instead, he’s looking at a very small number of categories with high frequency. News, finance, sports, entertainment probably. Lifestyles is the same—lots of subcategories don’t meet the bar. “We have to think about what the audience cares about and work back; we don’t have to build the deepest food site out there.” Think super mass vs. super niche. “We want to win in every category where we compete.” Sometimes that will mean partnerships, sometimes building.

Music: Moore is still coming up to speed on the entertainment properties, including music. He points to the 22 million in traffic it gets, but admits it needs work. As for the possibility of shutting down streaming music because of the change in royalty fees, Moore said: “All that is going to hinge on the negotiations going on right now. ... My guess there is that the industry will work out some form of agreement.”

Video: In the last year Yahoo has cut the number of video players down from 16. “We want to get very quickly to a place where we have a cohesive video strategy about how we play back video across different experiences.”

Media leadership team: Moore: “This is like a merger, not a takeover” so don’t expect a lot of changes. (Should have more clarity on this Wednesday when media holds an all-hands meeting.) After we spoke, Valleywag started pitching a story about Neil Budde, VP-news, leaving. I just heard from Budde and it doesn’t sound like he’s going anywhere other than on the road promoting Yahoo.

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Chicago Sun-Times: Moto's rising star heads to Cisco

Highest ranking woman's departure comes on heels of Zander's move

From the December 4, 2007 Chicago Sun-Times

BY HOWARD WOLINSKY Staff Reporter

Padmasree Warrior, 47, who left Monday as chief technology officer at Motorola emerged today as CTO at Cisco Systems Inc., the San Jose, Calif., networking and communications technology company.

She left Motorola on the heels of the announced departure of her boss, Ed Zander, Motorola’s chairman and chief executive officer .

In her personal blog at Cisco, she said: “It is an exciting time to join Cisco. Cisco is the company whose leadership legacy defines ‘The Network’ in many ways. Today, it is a company driving many new paradigms in communications and information technology. In the future, it will be a company poised to lead the industry to the next phase of Internet.”

As Cisco CTO, Warrior will play a key leadership role in the continued development and communication of Cisco’s technology strategy and vision, working directly for Cisco Chairman and CEO John Chambers.

Chambers described Warrior as a “technology visionary.”

Warrior said the next generation of the Web will be marked by “collaboration, Web 2.0 and always on demand. Cisco has been at the forefront of this shift, where the network becomes the platform to deliver the next wave of applications and services.”

Warrior, who became Motorola’s CTO under Chief Executive Chris Galvin in 2003, was credited with Motorola’s “seamless mobility” approach of having people communicating from any location over any device. Seamless mobility was adopted by Zander, 60, who joined Motorola in January 2004.

Warrior was the highest ranking female executive in Motorola’s nearly 80-year history.
“Over her distinguished career, Padmasree has demonstrated the key characteristics we prize at Cisco, including an unwavering commitment to customer success and innovation,” Chambers said. “She is a technology visionary, an excellent leader with a strong industry voice and business acumen, and we are thrilled to welcome her to our leadership team."

At Motorola, Warrior presided over the company’s $4 billion-plus research and development budget and 26,000 engineers.

The 47-year-old chemical engineer had been called a “rising star” by Fortune Magazine, but her own star may have fallen with the downturn at Motorola, which dropped to No. 3 in cell-phone sales in the third quarter after Nokia and Samsung.

Eric Jackson, a blogger, Motorola shareholder and corporate strategy governance expert, said, “I think Warrior leaving is a definite plus. She wasn’t well-liked among those I spoke with and
she also wears the lack of compelling new phones/features.”

He has called for the break-up of the company.

A company spokesman said Motorola had been realigning the technology organization since October in anticipation of Warrior leaving. Rich Nottenburg, Motorola’s chief strategy officer, was put in charge of Motorola’s overall technology vision.

Zander said Friday he will leave as CEO Jan. 1 and will be replaced by Greg Brown, Motorola’s president. Zander will leave as chairman after May’s annual meeting. The board has not named a new chairman.

Warrior said in a 2003 interview with the Sun-Times: “I know Motorola very well. I grew up in the company.” She joined the company’s semiconductor business as a chemical engineer.
She received her degree in chemical engineering from the prestigious Indian Institute of Technology, New Dehli, and has a master’s degree in chemical engineering and semiconductor production.

Before being promoted to be chief technology officer, Warrior ran Motorola’s energy systems group in Atlanta.

Was the fact that she was a woman a big deal?

She told the Sun-Times, “Yes and no. I think I have one of the most challenging assignments in defining the future of the company. The fact that I’m a woman doesn’t have any significance.
But I definitely I see myself as a role model for lot of the women who want to get into engineering, not just at Motorola. Out of 250 students in my class at IIT, only seven were women. I always talk to students in elementary school to encourage more and more girls and eventually women to get into the field of science and engineering. In that context, that’s my passion, I’d like to see more diversity.”

In September, she was inducted into the Women in Information Technology International Hall of Fame. The Economic Times recently ranked Warrior the 11th Most Influential Global Indian, and she was awarded the Distinguished Alumni Award from Indian Institute of Technology, New Delhi.

Working Woman magazine honored Warrior with its “Women Elevating Science and Technology” award in 2001.

Warrior served on the boards of Chicago’s Joffrey Ballet and Museum of Science and Industry, and the Chicago Mayor’s Technology Council, as well as other boards outside Chicago.

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Motorola Should Be Broken Up

Following the launching of our "Plan B" campaign for Motorola on July 9th, we called on the company to enact several actions to restore this company to its rightful spot of industry leadership. One of our suggested changes was replacing Ed Zander as CEO.

I have nothing against Zander. I know people who speak well of him and his time at Sun. I'm sure the last year has been tough on him and his family. However, it's a good thing for Motorola that he is leaving as CEO. Following many interactions with Motorola employees over the last 4.5 months, it's clear that they had lost faith in him.

Unfortunately, most I've spoken to have lost faith in most of the SLT -- perhaps save for Tom Meredith in Finance and also Legal (for what that's worth). Greg Brown, incoming CEO, is not well-liked.

I was concerned when he was appointed to the Board in August -- another insider added to a board with too many people and long-standing members already. Now, it's clear that the board had already decided back in the summer that Zander was not the man for the job. They were lining up Brown, while continuing to give him a few months more of seasoning.

Motorola has tried hard in the last few days to portray Brown as ready for the job. Several investors have said he's not the right person for the job... he doesn't have the "cachet" that some possible outsiders would.

I always advise clients that insiders statistically have a greater likelihood of success than outsiders. Therefore, if you've got a qualified insider -- more often than not -- you're better off with that person.

I don't think that fits here though. Although we'll have to see how Brown responds in the next 60 days, I don't believe he's the right person for the job for the following reasons:

1. Most people inside the company with whom I've interacted are not too fond of him. If he's their leader, they're not ready yet to follow.

2. Although he has a relevant background working at AT&T and Ameritech in the past, his resume seems lacking for this job. Micromuse was a small company, relative to Motorola. CEO experience at a much smaller company doesn't count as relevant CEO experience for this position. Senior leadership at a much bigger company would have been more comforting to shareholders.

3. Brown is as responsible for the current state of Motorola as Zander or anyone else. He's been on the earnings calls for at least the last year, doing his best to show Wall Street that he "gets" the need for urgency. He's used tough talk cliches ("no excuses") -- moreso than Zander and Meredith -- since they first missed at the start of the year, but performance has only gotten worse, not better. His elevation is a likely sign that Q4 is not going well. Check back on that in the 3rd week of January when they report results.

4. At least someone, somewhere tried to draw a comparison between Brown and Mark Hurd. The point was: both aren't flashy, so Brown should be able to replicate Hurd's results at Motorola as a result. Hurd under-promises and over-delivers. Brown has, so far this year, over-promised and under-delivered. Also, Hurd took a $2 billion company in NCR when he took over as CEO in March 2003 and grew it to $6 billion. Micromuse was much smaller when Brown was CEO. Micromuse was a different animal than Motorola. Despite the fact that Brown's been there for a few years now, he'll be learning on the job as CEO for a while.

Given all this, I agree with Carl Icahn that Motorola needs to be broken up now. With Brown in charge, and with the current board, Motorola shareholders would be much better off getting some value from the parts of Motorola, rather than keeping with the whole. Brown can endear himself to all Motorola investors by proactively taking this issue on now -- rather than being forced into this position if he waits another year and the stock slides below $10.

Finally, let the record show that Motorola would have been better off as a company if shareholders had elected Icahn to the board back in May. Shareholders were promised by Zander and Brown a turnaround once new handset models hit the market at the end of June; that didn't happen. Shareholders were promised by Zander and Brown a return to profitability before the end of the year; that won't happen. If Icahn had been sitting around the board table for the last 6 months -- holding directors' and management's feet to the fire -- shareholders would have been better off.

Let's hope Brown aggressively takes action to start to benefit Motorola shareholders. That would differentiate himself from his predecessor.

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SES Chicago: Igniting Viral Campaigns

This week WebProNews is at SES Chicago covering the conference. Stay here for all your SES coverage.

In the session "Igniting Viral Campaigns" Bill Hanekamp, CEO of The Well got things started by saying, "I get really nervous in front of SEO people, because I'm a marketing guy."

He said the content you provide should be:

1. Entertaining
2. Relevant
3. Timely
4. Exclusive

Those are the key elements to making things buzzworthy.

The content that visitors provide are:

1. Engagement
2. Referrals (links)

"Marketing nirvana is reached when you do this perfect," he said.

Ed Kim, CEO, Red Bricks Media, pointed to Eric Jackson as a good example of the user generated revolution, because of the Yahoo shares he owns he was able to nominate himself to the Yahoo Board, which empowers other users.

Kim said consumers are often going directly to their communities to get advice and what they want. He said, "You should identify and influence the influencers!"

Fionn Downhill, CEO, Elixir Systems, said social media is the hot new buzzword among online marketers. She noted that a recent Nielsen Survey found that 78 percent of people trusted recommendations from consumers. That's 15 percent higher than those who trusted the second source, which were newspapers.

She offered these free viral techniques:

1. RSS Feeds
2. Articles
3. White Papers
4. Adding links
5. Add email
6. Social Media (LinkedIn and Facebook)
7. Blogs
8. Forums

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CNET: Motorola CTO steps down following CEO's departure

From Dec. 3/07 CNET:

Posted by Tom Krazit

Motorola's chief technology officer has resigned her position, just days after CEO Ed Zander announced his own plans to move on.

Gizmodo reported Monday that Padmasree Warrior's departure was announced via a company-wide e-mail Monday, and a Motorola representative confirmed that Warrior is no longer with the company. Rich Nottenburg, Motorola's chief strategy officer, will assume the role of CTO.

The representative declined to comment on the timing of Warrior's announcement, following Friday's news that CEO Ed Zander would be stepping down at the end of the year following a disappointing year for Motorola's mobile phone business. Following the runaway success of the Razr, Motorola was unable to come up with a second act that would have kept the business rolling, and it slipped into third place overall among the world's mobile phone makers.

That would have been Warrior's responsibility, as head of Motorola Labs and the company's "early-stage accelerators," which were responsible for coming up with new ideas. The technology organization at Motorola had already started to change before Warrior's departure, with the software group moving into Nottenburg's domain.

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Chicago Daily Herald: Motorola's Zander says it's time to resign

From the Nov. 30/07 Daily Herald:

Says transition was in the works for a while

By Anna Marie Kukec Daily Herald Staff

Ed Zander's resignation today as chief executive of beleaguered Motorola Inc. didn't surprise Wall Street. Indeed, he said he has been planning this transition for the last two years by grooming his successor, Chief Operating Officer Greg Brown.

"It's time," said Zander, during an interview. "When I got here, it was a big move for me coming from the West Coast more than four years ago. My wife and I did a lot of soul searching and I was in a place in my career that I wanted to just take a chance here in Chicago."

Zander, 60, said he started talking with the board two years ago about putting a succession plan into place. That was when Motorola's share price was in the $20 range, the highest he would see during his tenure. Zander then put Brown, now 47, on the fast track by promoting him to different leadership positions.

"We kept giving Greg every conceivable job that we could throw at him and asked him to help build up this enterprise," Zander said. "And he's done a great job."

Brown will replace Zander by Jan. 1 while Zander will continue as chairman of the board. Zander doesn't receive any severance package because he resigned. But he still is eligible for all stock options and restricted stocks that vest Jan. 5, 2009, which would have been his retirement date.
In addition, Zander will be an adviser to Brown until Jan. 5, 2009, and so will be paid his regular salary and benefits until then, Motorola spokesman Chuck Kaiser said.

Zander's total compensation package earlier this year was estimated around $13 million.
Despite the take-home pay, it's been a long haul for the West Coast tech veteran of 40 years, whose career includes stints as managing director of private equity fund Silver Lake Partners and president and chief operating officer of Sun Microsystems.

By February 2004, Zander shivered through his first winter in Chicago and skied in with Wall Street accolades on the coat-tails of the then new Razr phone. That world-changing handset was under production by former Motorola CEO and grandson of a co-founder Christopher Galvin, who retired under pressure.

Coincidentally, Motorola's share price when Zander took over was $18.45 with an adjusted close of $15.95 in February 2004. The price peaked in the $20-range from mid-2005 through late 2006. The stock closed up 32 cents to $15.97 today.

"Ed Zander's big mistake was thinking that the single success of the Razr phone was enough. It was not," said independent telecom analyst Jeff Kagan of Atlanta, Ga. "The Razr may have been hot, but Motorola needed to replace it with another hot phone. Instead they rode it up and rode it back down again."

During his tenure, Zander faced much of what Galvin faced: the No. 2-rated mobile phone maker began a downward spiral in global market share against stiff competition, profits dwindled, layoffs and closed plants continued.

This year, especially, was hard on Zander and the company when billionaire activist Carl Icahn sought in vain to win a seat on the board.

"I like Ed Zander personally; I never thought that he was the right man for the job at Motorola," Icahn said in a statement today. "Further, I believe that the steps announced today do not even begin to address the major problems at Motorola. In my opinion, Motorola should be split into separate companies: a mobile devices company; an enterprise mobility company; a connected home company; and a company focused on mobile networks infrastructure."

A Florida-based consultant began a campaign to unseat Zander just as he did to Yahoo's CEO Terry Semel.

"I'm ecstatic. It's a step in the right direction, but it's not the entire solution," said Eric Jackson, president of Jackson Leadership Systems Inc., a governance consulting firm in Naples, Fla. He offered the Motorola board a reorganization plan that called for Zander to leave.

"This was needed," Jackson said. "You can't change much without starting with the top.

While Zander is removing himself from day-to-day operations, he will continue to be active on the board.

"That's a way of saving face," Jackson said. "It's more of a symbolic role. Eighteen months from now, he may not be chairman anymore."

Zander said in the last six months or so, he was working more closely with Brown to make the transition. In July, Brown and Chief Financial Officer Thomas Meredith insisted during an interview with the Daily Herald that Zander would remain at the helm despite Wall Street rumors a successor was being sought.

"Ed and I have been working very closely, especially these last few months," Brown said during an interview today. "We have been focusing on reconfiguring this company and integrating a lot of talent. This is a special company and it still has great potential."

Brown said together they've changed about 50 percent of the leaders in the mobile devices business.

Said Jane Zweig, a wireless devices analyst with The Shosteck Group in Columbia, Md.: "Brown is an organization guy, a networks guy, but he's not a consumer electronics guy."

"You still need someone in there with a good strong background in devices. Stu Reed, who heads up the supply chair, would be possible," Zweig said. "But this still raises the question of what Motorola has coming down the pipeline. Will it turn people's heads like the Razr once did?"

There is no magic turn-around key for Motorola, so Brown has his work cut out for him, said Mark McKechnie, an analyst with American Technology Research.

"The good news is, Motorola is promoting from within again, which can provide some consistency," McKechnie said. "It's better than when they brought in Zander from the outside, which didn't work."

Despite the detractors, Zander has many friends in the industry, including Stephen Luczo, who knew Zander when he was at Seagate Technology in Scotts Valley, Calif., where Zander had served on the board.

"We're happy that Ed's coming home," said Luczo. "He's done a good job at Motorola and Brown is also an outstanding guy. It's a testament to Zander to be able to do such a smooth transition."

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The AP: Zander's Turbulent Ride at Motorola Ends

From Nov. 30/07's AP:

By DAVE CARPENTER – 1 hour ago

CHICAGO (AP) — Ed Zander is out as Motorola Inc.'s chief executive after a roller-coaster four years that saw him oversee the cell-phone maker's Razr-led resurgence but ultimately bear blame for strategic gaffes and product whiffs that led to its steep decline.

The company's announcement Friday that Zander is resigning as CEO and that President and Chief Operating Officer Greg Brown will succeed him Jan. 1 produced little surprise and a muted reaction on Wall Street. Industry experts voiced skepticism the change will produce a turnaround unless accompanied by a new wave of top-selling phones and other mobile devices.

Regardless, the departure will end a wild ride for Motorola under the fast-talking Brooklyn native, a former Sun Microsystems Inc. president who was widely praised for leading the slumping company's resurgence in 2004-05 and castigated for overseeing its slide since the second half of 2006.

The two-year run of success following the launch of the ultra-thin Razr phone began crumbling last year after sales slowed and the company admitted it had been trading profit margins for global market share by aggressively undercutting pricing.

In a little more than a year, the Schaumburg, Ill.-based company has endured the departure of high-level executives, a Carl Icahn-led proxy battle, a 40 percent drop in its stock price and a sharp decline in its global cell-phone market share to 13 percent from over 20 percent. It slipped from the No. 2 handset maker to No. 3 this year, behind not only Finland's Nokia Corp. but Samsung Electronics Co.

The 60-year-old Zander, who will stay on as chairman until the annual shareholders meeting in May, said the decision to go was his alone despite the severe criticism he received for the company's struggles and some calls for his ouster. He told The Associated Press that he had initiated talks with the board of directors about his succession months ago and said he had intended all along to stay only about four years.

"This is what I wanted to do," he said in a telephone interview.

"You'd like to leave when you're at the top of your game. ... You don't like to leave when you have a year like this with mobile devices," Zander said. "But I think we have enough structurally done with this company that when mobile devices does get back to its execution, we're a stronger company than we were four years ago."

Analysts, however, were dubious the board of directors would have given him the extension he needed to stay on as CEO after he reached the four-year mark at the end of December. He needed a strong company rebound to assure his standing with directors and shareholders, and progress in the third quarter was only modest.

Icahn, the billionaire financier who lost a bid in May for a board seat so he could force some changes, hailed Zander's resignation as a positive step but said Motorola should be split into four companies in order to get the most out of its potential.

"I believe that the steps announced today do not even begin to address the major problems at Motorola," he said in a statement.

Eric Jackson, a Naples, Fla., management consultant and Motorola shareholder who led an online campaign to fire Zander, applauded the departure.

"This is a company that is in need of new blood and new direction," he said.

The resignation left some observers wary about what it might signal about the turnaround effort in the cell-phone unit, which is bigger than Motorola's other, more successful divisions: home and networks mobility, its second largest, and enterprise mobility, which sells computing and communications equipment to businesses.

"While Mr. Zander's departure has been the source of speculation for some time, we had thought that an improvement in mobile devices could possibly grant him a stay," said Citigroup's Jim Suva in a research note. "We now wonder if today's announcement signals yet another disappointment for the handset segment and more meaningful changes that have to occur."

Brown, 47, joined the company in 2003 and had been groomed for the top job, serving as president and COO since March. Prior to joining Motorola, he was chairman and CEO of Micromuse Inc., a network management software company.

He was instrumental in Motorola's $3.9 billion acquisition this year of Symbol Technologies, a maker of barcode scanners and handheld computers, and its $1 billion divestiture of the automotive electronics business last year.

Asked whether he envisions a departure from the company's recent strategy, Brown said he would provide an update in early 2008 on the next steps planned.

"We've made a number of changes already," he told the AP. "We're focused on finishing the year and ensuring a smooth transition."

Analysts are looking less for a miracle from Brown than they are for some oomph from the company's 2008 handset models, which it is expected to unveil starting at the Consumer Electronics Show in Las Vegas in January.

"Motorola's problems extend behind its leader," Dave Novosel of the Gimme Credit bond research firm said in a note to investors. "The company sorely needs a refreshed product portfolio to capture the tastes of cell phone customers."

CIBC World Markets analyst Ittai Kidron called Brown a "solid operational manager" who isn't expected to bring drastic change, although other experts said another wholesale restructuring is possible.

Zander does not get severance because he resigned voluntarily, the company said. He will continue to serve as an adviser to the CEO through Jan. 5, 2009, and will receive his regular base salary and benefits until then.

Last year, he was paid $1.5 million in salary and $2.2 million in other compensation and was given stock or option awards worth $9.5 million.

Zander's stock options and restricted stock units also will continue to vest and be exercisable during that time.

Motorola shares rose 32 cents, or 2 percent, to $15.97 in Friday trading. The stock is down 22 percent in 2007 and 39 percent off its six-year high of $26.30 reached in October 2006.

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The Register: Moto says hello goodbye to Zander

From Nov. 30/07, The Register:

Not RAZR sharp

By Kelly Fiveash → More by this author

Published Friday 30th November 2007 15:37 GMT

Motorola boss Ed Zander has been ousted as CEO by the firm's board of directors.

Greg Brown, the firm's current president and chief operating officer, will step into Zander's shoes on 1 January.

Zander will retain his role as chairman until Motorola's annual stockholders' meeting in May 2008.

Motorola director Samuel C. Scott, speaking on behalf of the board, said in a statement that the decision to drop Zander and elect Brown as CEO was the "culmination of a thoughtful and disciplined process of succession planning".

Zander, who previously worked at Sun Microsystems for more than 15 years, was given the role of CEO at Motorola in January 2004.

Earlier this year, amid disappointing sales figures and a profit warning at the firm, rebel investor Eric Jackson had called for Zander's head. In July, Jackson ruffled some feathers on the board with the publication of a statement ominously entitled "Motorola Plan B". He said:

"What has he [Zander] brought to Motorola that is really unique in the last three and a half years? If it's difficult to answer that question, we find it hard to imagine what he'll bring moving forward, which is why we suggest a change is needed now."

Motorola has slashed around 7,500 jobs worldwide since January this year, as it attempts to push the mobile phone company back into profitability. ®

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A New Start for Motorola, Its Employees, and Its Shareholders

We welcome this morning's news of change at the top of Motorola. We thank Ed Zander for his work as CEO over the past four years and look forward to Greg Brown, the Board, and the rest of the SLT leading this great organization to new heights.

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Interview Revealing Ed Zander's State of Mind at the Time

Interviews with the press are often illuminating. Despite the best efforts of corporate PR folks, not every comment can be scripted. Eventually, all of us have to stand on our own feet and speak -- warts and all.

I received my monthly Portfolio issue last night and was disturbed (as a Motorola shareholder) by some of the comments contained within an interview the magazine's Kevin Maney did with Motorola CEO Ed Zander.

Ed Zander has had previous off-the-cuff remarks come back to haunt him before. Earlier this year, leading up to the May Annual Meeting, at which Carl Icahn fought for a board seat, a Wall Street Journal article quoted Zander as having previously said in an internal meeting that he loved his job but hated his customers. Icahn later called the remark something "straight out of 'Alice in Wonderland.'"

Fortunately for Zander, there's no damning comment like that in this latest interview. However, there are several odd remarks which are worth noting. Ladies and gentlemen of the Motorola shareholder jury, these comments speak to the defendent's state of mind at the time he was (and still is to this day) running Motorola.

The video interview is here. The full printed interview is here. Excerpts are below with my comments.

CondeNastPortfolio: What went wrong for Motorola this year?

Zander: There was a disruptive technology called 3G. We underestimated when it would hit—thought we had another year—and we were late rolling out our products that use it. But in this business, you have to get the devices out across the world and in all price points. That's what were doing right now.

[Jackson: Underestimating 3G harkens back to Motorola's being late to digital from analog back in the 90s. Interestingly, 3 current Motorola directors were on Motorla's board then too. One of the arguments for keeping a director on the board longer than a decade would have to be that their institutional memory gives a valuable perspective to the board so that "newbie" directors and management don't make similar mistakes to the past. It would have been nice for Motorola shareholders if that had happened here.]

CNP: The stock price falls, and you have one of those classic nightmare moments: Your assistant walks into your office and says, "Carl Icahn's on line 1."

ZANDER: [Smiles] He wasn't on line 1. He was on my cell phone.

CNP: What did you talk about?

ZANDER: I don't want to go into that. I'll just say that last December we realized the products we had weren't what customers wanted, so we had to cut prices. And that was a big hole in our January earnings announcement. At the end of the month, I got a phone call from Mr. Icahn. It was surreal.

CNP: What did he say?

ZANDER: Keep in mind, at that time I had a great balance sheet. When I got to Motorola in 2004, we had so much debt that we had a hard time making our payments. So we worked real hard to get a really strong balance sheet. Icahn's team felt that money should be redistributed to the shareholders in order to get the stock up again. We didn't think so. And we had a lot of pleasant meetings.

[Jackson: "I had a great balance sheet"? The use of the word "I" is very interesting. In a company with as many employees (and executives on the Senior Leadership Team), no "I" does anything. It's concerning that he would see things in this way.]

CNP: Speaking of that, when you came in at Motorola, you went around visiting customers and got slammed.

ZANDER: That's a nice word for it. They pounded me for Motorola's poor quality, missed deliveries, whatever. So we made customer satisfaction part of our executive team's bonuses.

[Jackson: Translation... This company was a basket-case before I arrived. I had to fix these sorry guys up.]

CNP: At the Consumer Electronics Show, in January, you showed me a little card stating Motorola's corporate values and mentioned a big internal fight over the wording.

ZANDER: The line we fought over is "We're here to win." In Silicon Valley—I don't care if you're in last place—you think about winning every day. That line was too aggressive for some people at Motorola, but we're now No. 1 in set-top boxes for cable TV. We're No. 1 in government and public-safety radio communications.

[Jackson: The reference to the good old days back in "Silicon Valley" won't win many fans in Schaumberg or Naperville.]

CNP: What's the next Razr?

ZANDER: The Razr was like hitting a grand slam, and you can't hit a grand slam every time. You win baseball games with lots of singles and doubles, good fielding, good pitching. In the global device business, if you want to be successful, you have to be maniacally boring.

CNP: What do you mean?

ZANDER: It's about having lots of products come out on time. It's the supply chain. It's the cost structure.

[Jackson: 100% agree with everything Zander said in the last 2 comments. However, he and the rest of the SLT (including Meredith and Reed) use the term "maniacal" and "drumbeat" and "wave upon wave" way too much. We get it. However, this answer to "what's the next RAZR question has changed from 2006. Here's what the Wall Street Journal reported earlier this year: "A lot of you are always asking what is after the Razr," Mr. Zander said in an April 2006 conference call after another quarter of 30%-plus growth. "I say more Razrs."]

CNP: You've taken some hits recently for not buying Navteq. It's in your backyard; former Motorola C.E.O. Chris Galvin is the chairman...

ZANDER: I didn't know that about Chris Galvin.

[Jackson: Seriously? If not, why not? If you did, why would you say you didn't?]

CNP: He didn't call you up and say, "Ed, you should buy this company"?

ZANDER: No. But even if he had, Navteq has nothing to do with us. We're not in the applications business. You've got to pick what side you want to be on. Our goal is to provide the best platform for developers to create applications.

[Jackson: It's too bad Galvin didn't - could have been good for MOT and Navteq. As I've said elsewhere, I respectfully believe that Motorola desperately needs to be in the applications (some might call it services) business. If they don't, others -- like Google -- will take that piece of the value chain and Motorola will relegate itself to being a plastic shell hardware provider. The iPhone is apps plus form factor; it's not just a touch-screen. Nokia believes they needs to be in the apps business. Motorola thinks they'll win over services providers (phone companies) by not competing against them like some perceive Nokia to be doing. At the end of the day, the most valuable aspect of this value chain is in apps and Motorola has the special and unique advantage (over a Google) to combine form factor with apps.]

CNP: The price for Navteq was stunning: Nokia paid more than $8 billion.

ZANDER: God bless them, but that's just crazy.

[Jackson: We'll see. Anyway, it's a moot point, as Motorola couldn't have afforded to outbid for this. Therefore, blame your competitor for paying too much foolishly (see Google after the Microsoft investment in Facebook).]

CNP: Do you wish Motorola had the iPhone?

ZANDER: I have nothing but respect for Apple, but we did touchscreens with handwriting recognition in China three years ago. We, as an industry, tried touchscreens in the U.S. several years ago, and it didn't work. A lot of Americans don't like them.

[Jackson: If you believe the iPhone is just about having a touchscreen, I have a problem with that. Again, we'll see on the prediction. I would say the early returns don't support his view.]

CNP: What device do you use?

ZANDER: A Moto Q when I'm working. When I go out at night, I may have a Razr2. Eventually, you'll have one SIM card for your mobile devices, and when you plug that card in, it will recognize the device and shut off all your other devices. I think many of our customers will buy multiple devices, depending on the applications they want, and they'll have one phone number that works for all of them.

[Jackson: With the exception of some of my engineering friends, I don't see mass popping of SIM cards into and out of mutliple devices on a large-scale in the near future.]

CNP: Or so you hope.

ZANDER: Yeah.

[Jackson: Yeah. Motorola shareholders hope so too.]

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AARP Bulletin: The Power of You

From the November 2007 AARP Bulletin:

The Power of You

Shareholder activism is increasing.The big issues are boards, company policy, CEO pay.

By Carole Fleck

November 2007

Americans own trillions of dollars in stock through pension funds, savings plans and as individual investments. And increasingly, they're using their clout to rein in corporate America, launching campaigns to dump a CEO, to change a company's unprofitable course or to go green. Retiree groups are among today's most active shareholders, confronting directors they consider overpaid and fighting for more generous health and pension benefits.

Shareholder activism has been on the rise ever since the Enron and MCI WorldCom scandals, when employees and shareholders lost hundreds of millions of dollars to fraud, says Amy Borrus, deputy director of the nonprofit Washington-based Council of Institutional Investors. "Directors realize they have to take note when shareholders raise concerns."

The increased activism is reflected in lawsuits, in legislative pressure on regulatory agencies and in the record number of shareholder resolutions submitted to American companies—more than 1,191 so far this year. Among the big issues are boardroom accountability, financial performance, executive compensation, labor practices, jobs, the environment and campaign contributions.

"The potential for activism by individual investors has never been greater," says Patrick McGurn, special counsel with the New York-based RiskMetrics Group. He says new media—including Internet blogs, group websites, YouTube and podcasts—have given investors a much bigger platform.

Stronger disclosure rules, particularly involving executive pay, have also prompted investor activism. The Securities and Exchange Commission has in recent years required companies to disclose information on executive compensation packages, the selection process for boards and how shareholders can participate in that process. But the SEC went in another direction earlier this year when it proposed a rule that would limit shareholders' rights to sponsor resolutions.

And in a case that is being closely watched by business groups, the U.S. Supreme Court is expected to rule on whether shareholders can hold third parties, like accounting or brokerage firms, accountable for fraudulently inflating a company's financial performance. AARP has filed a brief in the case urging the court to allow investors to sue.

Investor retirees have long challenged corporate behavior at telecommunications giant Verizon. C. William Jones, 69, president and executive director of the Association of BellTel Retirees, which includes Nynex, GTE, Verizon and Bell Atlantic, has been leading the fight to improve Verizon's pension and health benefits for employees and retirees. His group won three increases for retirees with minimum pensions starting in 2000.

His 100,000-member organization also fought to restrict executive compensation. According to Jones, it took as long as five years to persuade Verizon to pass, in 2003, the retiree group's proposal to reduce senior executives' retirement benefits, which were running five times higher than that of company managers. Jones, of Easton, Md., who with other retirees regularly attends annual shareholder meetings, produces a quarterly newsletter that keeps retirees informed of company practices and association activities.

"If the retirees and employees are asked to tighten their belt because of the health of the company, don't you think the top should lead by example?" says Jones.

When asked about shareholder activism, Verizon spokesman Bob Varettoni said in a written statement: "We've experienced consistent shareholder interest over time, mostly involving issues that impact many large companies such as ours."

General Electric retirees have also been successful in changing company policy through the shareholder process. Kevin Mahar, 64, president of the Local 201 IUE-CWA Retiree Association near Boston, which represents communications workers, including General Electric retirees, drummed up support from other retirees and, in 1996, won what he called the largest single increase in GE pension plan history. A second cost-of-living increase took place in 2000, he says, and a third will go into effect this year. GE employees and retirees, as a bloc, are the largest single holder of GE stock. Mahar has attended the last 12 GE shareholder meetings and says he used to take on then-CEO and fellow Irishman Jack Welch: "I used a little Irish humor, and he used it back at me."

James McRitchie, a former ethics officer at a California state agency who 12 years ago started an Internet site for shareholder activists, says many retiree groups and individuals use the Internet, including blogs and online videos, to boost shareholder involvement. What's important in any campaign, he says, "is to bring issues to the attention of other shareholders."

In a sign of what's to come for investor activism, consider Eric Jackson's grassroots campaign, which thrives on new media. The Naples, Fla., management consultant, who owned barely $2,000 worth of Yahoo stock, was frustrated that the Internet portal had great potential for growth but "was going nowhere."

So he started a blog questioning Yahoo's leadership team. Then he unleashed "call-to-action" videos on YouTube, a popular online site, decrying Yahoo's poor performance and urging investors to vote against the CEO and six other board members.

Disgruntled investors with stock worth a startling $50 million got onboard, says Jackson, who attended the annual shareholders meeting in June. Chief executive Terry Semel, who'd been criticized for receiving one of the largest compensation packages in corporate America (reportedly worth more than $70 million in 2006) and the board members were reelected, but by relatively narrow margins. One week later, Semel resigned. Observers credited Jackson's online campaign and its outpouring of investor support.

"That was a good outcome," says Jackson, 35. "It's going to be more and more likely that individual investors will follow this path. You can't just say, 'I'm just one person. I only own 96 shares, therefore, who's going to listen to me?' As long as you have an argument to make and you can build a coalition, you can have an effect."

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The Path Back for Moto

It's been a rough-go for Motorola in the last few weeks. After its last quarterly call in which it guided higher for the Fourth Quarter, the market has treated it harsher than the general market during the month of November. The stock has slipped. Some critics are suggesting it be dumped outright -- frustrated because of a lack of change in management. We don't think so - yet. This is a company which can still save itself -- although there's no quick fix here.

Our group has been pushing Motorola's board and management for changes since July. Earlier this month, we had the opportunity to speak for over an hour with Motorola's head of IR, Dean Lindroth. Mr. Lindroth and the Management team deserve credit for listening and engaging in dialogue with a group of investors (133 individuals owning 600,000 MOT shares) who are frustrated and want to share ideas for turning around this great company.

We certainly didn't agree on each point that we presented, but they deserve respect for listening. We intend to continue to speak out in a positive and constructive fashion on ideas for how this company can better unlock value.

Here is a summary of the views we shared with Motorola:

We believe, as I’m sure management and the board do, that Motorola belongs back in its industry leadership position.

Here are our suggestions on “opportunity areas” that – if you were to implement – we believe would be received warmly by the Street and by existing Motorola shareholders and employees.

1. Improving the Culture. Any time you do RIFs, there’s obviously going to be a blow to internal morale and fingers pointed at management. From the comments I’ve heard from Ed, Tom, and Greg on this, I think your opinion is that this will work itself out as the company’s financial results improve. While I agree this will help, there’s an opportunity here to further bolster the morale: Bob Galvin. I have been impressed with how highly Bob is still regarded by Motorola employees. There is still a deep appreciation for the values he instilled in the company. Although whenever a new leader comes in, there is a need for change, there is an enormous opportunity to remind people that the best aspects of Motorola’s old culture still exist. I am not saying Ed and the team need to recapture the Motorola of old. There were some parts of that (some would say) more paternalistic culture that don’t necessarily fit in today’s marketplace. However, there were some amazing and unique aspects of the old culture which employees should be reminded about. If Ed were to meet with Bob and perhaps invite Bob to an internal “town hall” type of meeting, I think there would be a great boost to the morale. This wouldn’t diminish Ed’s status as the leader, but strengthen it.

2. Further Clarify Strategy (Business, Corporate, Software, Acquisitions). “Seamless Mobility” is a catchy phrase. I think I understand what Motorola means by it and how it results in your core three businesses, etc. However, I’m not sure and I don’t think I’m alone here. It would be helpful for me – as a shareholder – and, I believe, to other analysts, institutional investors, and employees, if Ed could more clearly spell out what Motorola is building towards in the coming 3 – 5 years. How are you going to be unique compared to Nokia, Samsung, the iPhone, and Google? How do the three businesses all fit together? What are the criteria you use for new acquisitions? How will you win in software (see point below)? You don’t want to share your most intimate of strategic details with your competitors, but – in my opinion – you’ve been too private. By not speaking up more, there is a perception created that there is not a clear strategy being followed. That was ok when things were going well with RAZR, but you can’t skate by without more explanation these days. Another way of putting this is that you could win over so many more supporters with just more explanation as to where things are heading. Tom has done a great job of this within his area. He’s provided some clear metrics to measure his effectiveness on in 1 – 2 years from now. The Street loves this. We need the equivalent of this from the strategic perspective.

3. Winning in Software/Services. I think the most important hire you’ve made in the last 6 months is not Stu Reed to lead MDB but Alain Mutricy to head up software. Many of your competitors (most notably Nokia) have staked out software/services as a key area for battle in the next 5 years. Now Apple and Google are raising the stakes further. Motorola has always known the importance of software; hence the Good acquisition. However, there is still much work to do here. Streamlining onto fewer platforms and getting Linux/Java out the door is necessary but not sufficient for beating your rivals. The bar has really been raised by the companies mentioned above (even though I know Google is technically a MOT partner, just as Windows Mobile is a partner). We need a much stronger story to tell about what’s unique and exciting from a user-perspective about Motorola’s software. Otherwise, you’re a hardware vendor. Ed knows better than anyone that that’s not a market space you want to be relegated to. You need to say more than “stay tuned” on this issue. The Street wants to know how we’ll be different.

4. Further Strengthening the Board. I know Motorola and its directors take corporate governance issues very seriously. You have some very strong individuals on the board. However, we believe that – after a certain period of time on the board – one’s independence diminishes through no fault of a director’s own. Right now, the board at Countrywide is under-fire on this issue of director tenure length.[1] A decade is a fair length of time for any non-executive director serving on any company. We appreciate the years of service provided by Judy, Lewent, Nicolas Negroponte, Samuel Scott III, and Dr. John White, but we believe there is an opportunity to bring in some fresh eyes – as you have done recently with Anthony Vinciquerra of Fox and David Dorman. We think doing so would strengthen your standing on Wall Street (assuming you pick the right people). As with the point on Culture above, there’s an opportunity here for the Company to turn a perceived weakness into a strength. Instituting a required stock purchase amount by directors would also be appreciated by the Street and – according to research I’ve done – also result in even more meaningful participation by all Motorola directors.

[1] http://online.wsj.com/article/SB119404440821681023.html

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Goodbye, Moto

From yesterday's MSN Money:

Like the song says, "some say love it is a Razr that leaves your soul to bleed." Well my soul has bleed out waiting for Motorola's stock to turn around. I can't wait any longer -- I'm not Job after all.

Motorola has been screwing up for so long, it even gets it wrong when it gets it right. Last quarter the company delivered another lousy set of sales and earnings numbers, yet it guided fiscal fourth-quarter earnings to a range of 13 to 14 cents a share -- a few pennies above The Street's consensus. Normally, guiding estimates higher would be perceived as a good thing -- and it was at first as the stock edged higher on the news. However, in offering up hope for the fourth quarter and the upcoming year, CEO Ed Zander might have won himself a new contract -- and that's bad news.

You see one of the reasons I bought Motorola's stock down at its lows was in anticipation of a new management team. Typically when a struggling company finally ousts its old CEO in favor of someone new and full of promise, the underlying stock tends to rally. Until recently, Zander's ouster was all but certain. But in light of the company's modest progress off a terrible set of numbers, Zander might just hang around. Let's face it he did take all the credit for the Razr so there might be a board member or two who thinks he's on the verge of another one-hit wonder.
Now I don't know if the new CEO would be Motorola's own Greg Brown (current President and COO) or an outsider like former Qwest CEO Dick Notebaert and frankly I don't much care -- it's just at the point where anyone but Zander will do. Isn't there a young Galvin kid somewhere looking to reestablish the family name?

Without a change at the top, Motorola's stock will be stuck at the bottom. It was the one big catalyst we needed for the stock to make a run back into the low $20s. The Razr2 sure as heck isn't the answer to our turnaround prayers. Granted sales have been a little better than expected, but the price is still too high, the functionality is hit -or-miss and the design has lost its cool factor. And don't even get me started on the Q. Motorola's answer to the smart phone craze was put to shame by Apple's iPhone and Research-in-Motion's BlackBerry Pearl. Motorola can't give the phone away -- though it has tried hard, which helps to explain the company's declining margins.

So after waiting and waiting, I wait no more. Goodbye Moto.

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Financial Week: Boards on the Hot Seat

From Nov. 12/07 edition of Financial Week:

Nominating committees in the spotlight amid succession woes in corporate America; watch out for KB Home and Blockbuster

By Jeff Nash

November 12, 2007

Suddenly empty CEO seats at Merrill Lynch and Citigroup are turning up the pressure on boards to do a better job grooming talent from the corporate ranks.

For many companies, the difficult task of overseeing succession planning falls on the board's nominating and governance committee. Just as audit committees took the brunt of shareholder criticism following the Enron and WorldCom blowups, and compensation committees were on the firing line to comply with new Securities and Exchange Commission disclosure rules last year, nominating committees seem headed for the hot seat in 2008.

“Absolutely—the focus is shifting to the nominating committee,” said Richard Koppes, a lawyer at Jones Day and a director at Apria Healthcare Group and Valeant Pharmaceuticals International. “This is the committee that will have to reach out and engage with shareholders on some really tough issues in the coming year.”

Many boards admit they're struggling with succession planning. A study earlier this year by the National Association of Corporate Directors and Mercer Delta Consulting found that roughly half the directors surveyed from public, private and non-profit boards said their boards were “less than effective” at the task.

Such ineffectiveness can carry a high cost: CEOs recruited from the outside earned median pay of $13 million in 2005, compared with $5 million for those promoted from within, according to the Corporate Library, a governance research firm.

At Merrill Lynch, the price tag to replace former CEO E. Stanley O'Neal, whose exit pay was $161.5 million, will likely be much higher that that figure in the end.

“In the race for the CEO spot, often those executives who aren't elevated decide there's no future and leave for another company,” said Claudia Allen, chair of the corporate governance practice at law firm Neal Gerber & Eisenberg. “Some CEOs don't like a powerful No. 2 or No. 3 around and eliminate them. And then there are those companies that need to spend a lot more attention on bench strength.”

Along with succession planning, the nominating committee will have to spar with increasingly empowered shareholders on all things governance. According to governance research firm RiskMetrics, 656 shareholder proposals had appeared on 2007 corporate ballots through Sept. 15, up from 581 last year.

For example, the nominating committee at Axcelis Technologies will have to decide what to do after a shareholder proposal to repeal its classified board structure received 91.4% of the votes earlier this year, the highest support for a governance proposal this past proxy season. At KB Home, a proposal seeking a vote on golden parachute packages garnered 85.6% in favor. And at Blockbuster, 61.9% of shareholders voted in favor of eliminating the company's dual-class structure.

And now that a third of S&P 500 companies allow board nominations to be approved by simple majorities, a major challenge for nominating committees will be figuring out how to handle potential “no vote” campaigns, in which a shareholder asks other investors to vote against one or more directors.

While specifics vary from company to company, the general rule is that any director not receiving a majority of votes in favor of election should tender his or her resignation. The nominating committee then has to find a new candidate, shrink the board size or choose to disregard the resignation.

The New York Stock Exchange has even proposed leveling the playing field with Rule 452, which would bar brokers from voting shares held on behalf of investors, as brokers usually side with management and support its nominees. The SEC has yet to approve the rule, which was supposed to take effect Jan. 1, but will now not be considered until 2008.

“Boards will have a tough time justifying the continued service of a director who has been successfully targeted by such a campaign,” Mr. Koppes said.

Case in point: Many observers think the grass-roots campaign to oppose the re-election of seven of Yahoo's 10 directors—led by shareholder Eric Jackson, who owns just 96 shares—played a role in the board's removal of CEO Terry Semel in June.

Shareholders are also pushing for more access to the director nomination process.

While many directors oppose proxy access, Mr. Koppes said they should be proactive in gathering director nominee suggestions when meeting with key shareholders. A good dialogue between shareholders and the boards, he said, “goes a long way in making investors feel included and avoids confrontation. It's all about engagement.”

Perhaps the biggest challenge for the nominating and governance committee will be figuring out a way to meet with key shareholders to address their concerns. In the past, many directors argued that such meetings were solely the duty of management, but shareholders are increasingly demanding more direct contact with the board.

“Nominating committees will have to take the lead in reaching out to shareholders,” said Mr. Koppes. “Sure, you have to be careful about an individual director carrying out his or her own agenda, but this notion that only management represents the company no longer holds water. Shareholders' representatives are the board.”

Some companies may take the lead of Pfizer, whose board met with its largest institutional investors, representing 35% ownership of shares outstanding, in October. According to a company statement, the directors “participated in a listening role since their primary objective is to grasp what is on the minds of investors.” While Pfizer announced these meetings would be held regularly, company spokeswoman Shreya Prudlo said she couldn't comment on when the next one would take place. FW

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