BUSINESSWEEK ONLINE : NOVEMBER 13, 2000 ISSUE
NEWS: ANALYSIS & COMMENTARY Commentary: It's Getting Lonely at the Top. Too Lonely Retirement just isn't what it used to be for some onetime stars of Corporate America. Just ask Henry Schacht, who successfully ran Lucent Technologies Inc. ( LU) from 1995 to 1997. Or Paul A. Allaire, Xerox Corp.'s ( XRX) much-celebrated chief executive officer of the '90s. They've joined an exclusive--but recently fast-growing--club: CEOs who have been called back to duty after their successors were shown the door. The problem? There were no internal candidates ready to step into the top job. So is Corporate America facing a CEO shortage? In some senses, it is. Major U.S. companies appear to be ousting their leaders more quickly than ever before. Worse, many seem at a loss as to how to fill those empty corporate thrones. And that is only likely to increase the already fierce competition for proven executives. ''It's at a crisis level,'' says Patrick S. Pittard, chairman of executive search firm Heidrick & Struggles International Inc., of the talent shortage. ''And it will only get worse.'' NO PATIENCE. In the past year alone, Procter & Gamble's ( PG) Durk I. Jager, Gillette's ( G) Michael C. Hawley, and Coca-Cola's ( KO) M. Douglas Ivester have all been pushed out. And on Nov. 1 came another casualty: Robert E. Knowling Jr., chief of high-speed Net-service pro-vider Covad Communications Co. ( COVD), resigned in the wake of a larger than ex-pected loss. According to Chicago-based outplacement firm Challenger, Gray & Christmas Inc., 129 CEOs of companies large and small left office in October alone, up from 60 a year earlier. What's going on? For starters, with Wall Street investors and company boards increasingly impatient for results, CEOs are getting bounced more quickly than ever. Imagine a CEO today blowing a product introduction the way Roberto C. Goizueta did back in 1985 with New Coke--and lasting more than another decade at the helm. At the same time, corporate boards, particularly those that have hit rough waters, are more bent than ever on landing a marquee-name CEO to calm-- some would say placate--Wall Street. That narrows the candidates and puts huge pressure on the incoming stars to get results. Too often, that leads to earnings projections that can't be met. Last, rapid technological change, as well as global consolidation in industries from banking to aerospace, means companies need CEOs skilled in running sprawling enterprises. That calls for an ability to manage complexity that many upcoming leaders don't learn at individual businesses. ''The scale [of these companies] is something many executives haven't been exposed to,'' says Dennis C. Carey, vice-chairman at executive recruiter SpencerStuart. The result: more companies chasing a select group of brand-name executives. And the competition is likely to drive up already hefty CEO salaries. ''We'll see proxy shock for years to come,'' says Heidrick & Struggles' Pittard. OLD REMEDY. That's why companies may have to cast a wider net for CEO talent. Jeffrey A. Sonnenfeld, president of the nonprofit research group The Chief Executive Leadership Institute, says more boards will turn to executives from other industries. Companies will also have to be more flexible on age, hiring either older execs or younger, less tested managers for the top job. Recruiters say Coca-Cola's recent hiring of 74-year old former President Donald R. Keough as an adviser is a sign that companies are ignoring age in favor of talent. Of course, much of this scramble for talent could be avoided. According to a survey by the National Association of Corporate Directors, a startling 45% of boards at companies with sales in excess of $500 million have no meaningful process for grooming potential CEOs. Corporate governance pros agree companies have to do a better job of drilling down into the organization to spot and nurture future stars early in their careers. ''My advice to other boards...is to do your succession planning on a continuing basis,'' says George H. Heilmeier, a director at Compaq Computer Corp. ( CPQ) The computer maker selected insider Michael D. Capellas to lead the company last year and has so far been rewarded with strong sales growth. That success stands in sharp contrast to the churn now taking place in much of the rest of Corporate America. By Amy Barrett and Louis Lavelle Barrett covers corporate strategies from Philadelphia; Lavelle covers management from New York. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Commentary: It's Getting Lonely at the Top. Too Lonely CHART: Help Wanted INTERACT E-Mail to Business Week Online

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