How to deal with non performing managers?
In May 2005, I had suggested to the Pfizer Board that it was time to fire Hank McKinnell. The company’s competitor Merck had taken way too long to get rid of Raymond Gilmartin, who put the company in the mess that it is today due to its mishandling of recall of Vioxx. The Pfizer board refused to act till now.
Joe-out, John-in
Merck & Co., Inc. committed a big mistake when it put an insider (Richard Clarke) into the top job instead of finding someone who could bring fresh thinking to the company. The result: no substantive change in strategy. Pfizer Inc. has also done the same. Jeffrey B. Kindler is a company insider and I would not expect any meaningful change.
How to deal with non-performing executives?
First of all, I am very skeptical of boards that are full of pals who just enjoy the prestige and perks but really create no value to the enterprise (I think that there are better ways to reward your pals than to put them on a board). Having said that, even if a board is unwilling to fire a non-performing executive, it is much better to just let this person have a job ban her/him to actually work. A better replacement must do the job. A non-performing executive can destroy even more shareholder value than the (exhorbitant) salary paid. Just take a look at the chart at the top to see the damage that McKinnell did to Pfizer (according to Finance 101, the only metric for success in business is shareholder value creation).
And right now there are two other executives that should leave: Terry Semel (Yahoo! Inc.) and Michael Dell (Dell Inc.).
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