t

UV4226

os
CORPORATE GOVERNANCE

rP
The Jack Wright Series # 5 – CEO Succession
Planning, Selection, and Performance Appraisal

Jack Settles in as a Mega Director

Jack Wright had been on the board of the Mega Corporation for six months, and had

yo
attended three meetings – April, July and October. He had concluded that there were very
important problems that needed to be addressed. While the situation at Mega was not as urgent
as the turnaround he had engineered in his company, he saw many similarities. He thought he
knew how to go about getting the problems under control, but he had not determined the best
way to unscramble the leadership situation. John Rock was not performing, was nearing
retirement age and there was no succession plan.
op
What was the fundamental problem?

The Nominating and Governance Committee was composed of Sam, John, Sally and Bill
Monday, and Jack had the strong opinion that they, with the possible exception of Sally, were
not going to bring anyone or any issue forward that might shake things up.
tC

His opinion was that Sam Bigger had abdicated any responsibility for running the
company, but gave no sign that he was willing to turn authority (control) over to someone who
would take on the responsibility. John Rock was an excellent operating manager, but he was not
a strategic thinker, nor was he the kind of person who had the experience to undertake the tough
actions or make the deals necessary to reposition (restructure) the company. In addition, he was
totally deferential to Sam.
No

New leadership was needed. Whether John could fit into a new leadership structure was
uncertain. He was a man of character and some ability, and had a strong following in the
company. His support would make dramatic change more feasible. On the other hand, would he
Do

This case was prepared by Wallace Stettinius, Visiting Lecturer, George W. Logan, Lecturer in Business
Administration, and John L. Colley, Jr., Almand R. Coleman Professor of Business Administration both at the
University of Virginia Darden School of Business. This case was written as a basis for class discussion rather than
to illustrate effective or ineffective handling of an administrative situation. Copyright  2003 by the University of
Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to
sales@dardenpublishing.com. No part of this publication may be reproduced, stored in a retrieval system, used in a
spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or
otherwise—without the permission of the Darden School Foundation. Rev. 11/2/05.

This document is authorized for educator review use only by ATIF BILAL, HE OTHER until Apr 2019. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or
617.783.7860
 t
-2- UV4226

os
want to be a part of drastic change in which some of his long time associates would be hurt? He
certainly was not capable of being the catalyst for the necessary changes, at least in Jack’s view.

Jack Ponders the Critical Question

rP
The important question, from Jack’s perspective, was in regard to Sam. How could he be
brought to understand the precarious strategic position of Mega and be convinced to step aside
for someone with the interest and vigor to lead the company and address the pressing issues?
The first hurdle was his ownership stake – his 15%%, his sister’s 15%, and the foundation’s
10%. With their 40% stake, together with many friends among the shareholders, it was difficult
to foresee a way of voting him out of control. How else might he be brought around to
understand the problems?

yo
Jack had been watching Sam closely. He observed that Sam handled the board meetings
in a very autocratic manner. He became very impatient when a discussion went on beyond his
short attention span. He expected the board to agree with him when issues came to a vote.

During the last board meeting, Herman Abrams suggested that the board should receive
op
special reports on a couple of the poorer performing companies. He wanted to know what was
being done to “fix them or sell them.” Sam became somewhat angry, saying that he did not want
his company’s management to be second guessed by the board.

Once again, Jack thought about where the directors’ individual loyalties lay. Jack
recognized four people as being totally loyal to Sam Bigger: John Rock, Bill Monday, Joe
tC

Cummings, and Sally Moses. He thought that Sally, while loyal, was open-minded and might be
a key to getting to Sam. She was clearly growing more uncomfortable with the current situation.

He began to suspect that while Howard Bigger was in his father’s shadow, he was closer
to his siblings, and could well be concerned about his inheritance. Sam had said that he intended
to leave all of his Mega stock to the foundation. Half would be an outright gift and half would
be for 20 years. In the latter case, the foundation would receive the income over the life of the
No

trust, and then the principal would revert to his heirs.

Harry Harmony was something of a peacemaker, but he, too, had hopes of receiving
income from the foundation for the college he headed.

The other six members of the board all seemed to be somewhat uncomfortable with the
existing situation and open to finding another approach for the company. But none, so far, had
stepped up to take the lead.
Do

What should Jack do? Should he confront Sam directly? Should he advocate hiring a
consultant to study the problem? Should there be a special committee charged with studying

This document is authorized for educator review use only by ATIF BILAL, HE OTHER until Apr 2019. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or
617.783.7860
 t
-3- UV4226

os
succession? Could he, as the newest member of the board, lead the charge to bring about
effective leadership on the board?

Jack decided that he had to stop “going along to get along.” This meant to him carefully
becoming more assertive, but staying positive in the way he approached issues and people. He

rP
decided that he would have some conversations with John Rock to feel out his (Rock’s) views
and his personal goals – this he thought was the logical starting point. He also felt that he owed
this consideration to John, as his friend and as the person who had brought him onto the board.
In a similar vein, he would feel out Phil Agee. In both cases, he was particularly interested in
how Sam might be persuaded to be more aggressive in striving for performance. He thought
about how Sam Bigger and John Rock had built such a successful company. Sam was, at one
time, a very talented entrepreneur. He also was very controlling – a common trait among such

yo
people. Sam didn’t want to give up control, yet he was no longer running the business. He was
just preventing others from doing so.

Jack was beginning to sense that the two people to whom Sam might listen were his
sister, Sally, and Bill Monday, his long time friend and lawyer. They had to know things weren’t
satisfactory. Jack speculated that if they were given a solid plan to confront the current issues
op
that they perceived to be in Sam’s best interests, was not embarrassing to him, and treated John
Rock fairly, they might help win Sam over. There were a lot of ifs and he didn’t have the plan,
at least not yet. So, he wasn’t ready yet to pursue this course of action.

He decided that he should develop a plan, and check it out with Phil Agee and then John
Rock. He anticipated then being able to approach Sally Moses, after which he would talk with
tC

Bill Monday. Since it was near year-end, Jack knew the Executive Compensation Committee
would be concerned with executive performance and compensation levels for FY 2003. He was
familiar with the current compensation arrangements and considered them seriously flawed. He
wondered if the forthcoming discussions would provide him the opening he sought to influence
board deliberations, helping to form the plan he knew he needed to effect long-term change.
No
Do

This document is authorized for educator review use only by ATIF BILAL, HE OTHER until Apr 2019. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or
617.783.7860