DuPont is an aristocrat of American enterprise. It’s hard to believe that it had no one lined up to step into the CEO’s job at a moment’s notice.
Of the many surprises surrounding Ellen Kullman’s abrupt departure as DuPont’s CEO on Monday, the greatest is being largely overlooked in the news coverage: It’s the company’s utter succession failure.
When DuPont announced Kullman’s retirement yesterday, it announced also that Ed Breen, who became a director only eight months ago, would become interim CEO “while the Board completes its search for the next executive to lead DuPont.” It might more accurately have said “while the board begins, conducts, and completes its search…” since the company announced it had retained an executive search firm. In addition, while Kullman remains CEO until October 16, Breen became “interim Executive” as of Monday. She isn’t a lame duck CEO; she’s gone. In short, this all seems to have happened very quickly, perhaps on Monday or maybe over the weekend, and DuPont’s board was entirely unprepared for it.
That is shocking for a few reasons:
-DuPont is an aristocrat of American enterprise, huge and successful for over 200 years. That its leadership pipeline contained no one who was ready to step into the CEO’s job strains belief. A well made succession plan always includes “a name in the envelope,” an executive who is prepped and ready to take over the CEO job at a moment’s notice if necessary. (At General Electric, for example, the name is widely assumed to be vice chairman John Rice, though the company never discloses this.) DuPont apparently had no one.
-Kullman had been CEO for seven years. Though she’s only 59, the process of developing potential successors should have been well along by now.
-In Kullman’s highly publicized proxy battle with activist investor Nelson Peltz last spring, she and the company stressed that they were managing DuPont for the long term, urging shareholders not to be beguiled by Peltz’s insistence on quick-fix boosts to profits. Yet this long-term oriented company seems not to have focused on the ultimate long-term investment, leadership development.
Kullman was undone by a plunging stock price and a profit outlook that turned bad and then got dramatically worse. Since early March, the stock was down some 38% (vs. a 4% drop for the S&P). Operating profit in last year’s second half was $0.96 a share; the company had previously said that this year it would be only $0.75; on Monday, the company said it would actually be about $0.40. It’s hard for any CEO to survive that.
Kullman now joins that unfortunate club of CEOs who step down abruptly with no permanent successor named, and the stock goes up on the news. DuPont gained about $4.5 billion of value yesterday.
Two of the greatest leadership scholars, Warren Bennis andNoel Tichy, wrote that “CEO succession in any type of organization—from political to not for profit, to business or the military—is the key determinant of organizational performance.” DuPont’s succession failure is worse than just a corporate mystery.