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The Highs and Lows of Being a CEO

Of all the challenges a CEO faces today, simply showing up to accept the job would hardly rank near the …

Of all the challenges a CEO faces today, simply showing up to accept the job would hardly rank near the top of anyone’s list. But for L. Dennis Kozlowski of Tyco International, even that ceremonial occasion proved an endurance test of sorts.

It was July 1992, and Kozlowski was in New York City on his way to meet with Tyco’s board of directors when, in the middle of Lexington Avenue, the former high school athlete tripped and fell. His hands in his pockets, Kozlowski landed on his shoulder, and as he sat up he felt a shooting pain. His shoulder had popped out of its socket.

A passerby called an ambulance, which took Kozlowski to an emergency room. “They pulled my shoulder out and popped it back into place,” recalls the now 54-year-old CEO. Hours late, he rushed to the board meeting, arriving as it was breaking up. “Did I still get the job?” he asked. “Yes,” a board member replied, “in spite of yourself.”

While the demands on chief executives rarely involve physical pain, Kozlowski’s tumble illustrates a fact of life for corporate warriors today: Problems with potentially serious consequences can, and do, arise when least expected. But unlike the remedy for a dislocated shoulder, the challenges related to running a company often lack a quick or clear-cut fix. Or, as Kozlowski puts it: “The things that reach my desk are all the gray areas. If something’s black and white, then people can figure that out themselves.”

Indeed, if there is one constant in the life of a CEO it is uncertainty. As the world shrinks, it becomes more complex. The U.S. economy seems poised to rebound one moment, then sputters the next. And public markets swing wildly on rumors and sound bites. Yet the pressures on chief executives to deal swiftly with setbacks and produce reliable earnings for Wall Street are greater than ever.

All of this is happening, of course, at an ever-increasing speed. Shareholders have short fuses, and boards are quick to oust even seasoned leaders who fail to perform.

Obviously, top corporate jobs are not without their rewards. Compensation from salaries and stock options can be astronomical, and media attention can boost the profiles of high-flying CEOs into the stratosphere of rock stars.

Few CEOs have experienced as many highs and lows as Kozlowski. Raised in Newark, NJ, the son of a police detective, Kozlowski rose through the ranks at Tyco, and as CEO has overseen hundreds of successful acquisitions and phenomenal revenue growth. Along the way, he reduced the company’s dependence on the cyclical construction business by expanding its holdings in security services and health care. In July, Tyco reported a 22 percent rise in net income in its fiscal third quarter, and forecast continued profit growth for the year, despite weakness in its electronic business. And in August, Tyco agreed to acquire Sensormatic Electronics for about $2.18 billion in stock, and $116 million in debt.

Nonetheless, Kozlowski can’t seem to shake skepticism about Tyco’s ability to succeed as a conglomerate. The shadows of ITT and AT&T loom large, although Kozlowski prefers to draw comparisons to another conglomerate that has performed well-General Electric.

But those doubts pale in comparison to accusations, aired in late 1999, that Tyco had used improper accounting practices to inflate earnings. These claims, by money manager and short-seller David W. Tice, spurred a Securities and Exchange Commission inquiry and cut Tyco’s market capitalization in half. “Once the stock started tumbling, there was a feeding frenzy,” says Kozlowski, who considers the episode a low point in his career. In July 2000, the company, which strongly denied the accusations, won vindication when the SEC closed its investigation and took no action.

In facing such trials Kozlowski is not alone. CEOs confront hundreds, even thousands, of decisions in a day. They fire customers, and crunch mind-numbing quantities of numbers; they manage hungry investors want more.

If anything, the tough economic climate has only heightened the peaks and valleys, from landing a major new account to coping with a delisting from the NASDAQ. Ten CEOs recently talked with Chief Executive about these experiences and other, more subtle ones, in summing up the highs and lows of their jobs. What follows are their stories.

400 deals


As the CEO of a company with a reputation for consuming other companies, L. Dennis Kozlowski knows that what may at first seem like idle chatter is rarely that-idle. Whether the setting is a cocktail party, a fundraiser or even a backyard barbecue, conversations with Kozlowski invariably turn to deals, and, more often than not, to potential targets for those deals. “Every event I go to-and that’s why I don’t like going to too many events-somebody is trying to sell me something,” says Kozlowski.

And who can blame them? In the nine years since Kozlowski, 54, was named CEO of Tyco International, the Bermuda-headquartered conglomerate’s sales have mushroomed to $38.5 billion from $3 billion. Much of that growth has been fueled by Tyco’s endless appetite for acquisitions. Since 1992, the company has completed more than 400 such deals, earning Kozlowski headlines such as “Deal-a-month Dennis” and the “CEO on Steroids.”

While Tyco’s buying binge began before Kozlowski took control, it has evolved into a far more disciplined-and routine-activity under his watch. “It’s just part of our ingrained culture,” says Kozlowski, who shuns corporate bureaucracy and runs the company out of offices in Exeter, NH. “All of our senior operating people are geared toward looking for acquisition opportunities.”

And despite his protestations about unsolicited pitches, Kozlowski, too, remains on the prowl, quietly but aggressively pursuing companies. “In some cases, you get a call back three years later from the CEO who says, €˜yeah, I thought about it. I’ve done this long enough and I’m ready to do something else now,'” he says, noting that Tyco’s 1998 acquisition of U.S. Surgical Corp. occurred after just such a delay. In another instance, Kozlowski found an entrée to a deal through his daughter’s friendship with a Middlebury College classmate. The classmate’s father was a partner in a leveraged buyout firm that owned a hospital-supplies company Kozlowski wanted to buy. So he called the partner, and after four months of negotiations, Tyco acquired the Kendall Company.

Not every deal falls together so serendipitously. And the details of the acquisitions are, obviously, complex. But the qualities Tyco seeks in prospective partners are relatively straightforward: Target companies must add to earnings-immediately. They must relate to one of Tyco’s existing divisions, which include medical products, electronics, fire protection, and security systems. (A notable exception: Tyco’s $10 billion acquisition of CIT Group, the nation’s biggest independent finance company.) It helps, too, if the company is in the midst of a rocky period, with layers of management or inefficient plants that are easily eliminated.

Once a deal is done, Tyco’s systematic approach means layoffs and other cost-cutting measures are announced within a few weeks of the change in control. When Tyco acquired ADT Ltd., for instance, it quickly eliminated 1,000 of 8,000 jobs; at AMP, 8,000 of 48,000 workers were let go. Overseeing such layoffs, says Kozlowski, is “the crummiest part” of being a CEO. “But it’s unfortunately a necessary part of the job,” he adds, “because if you don’t do it, your competition is going to.”

Yet for all of Tyco’s planning and analysis, Kozlowski is well aware that deals still go awry. For every one that’s completed, he estimates, nine or so others collapse. In an effort to avoid buyer’s remorse, Tyco M&A experts spend time both poring over financial records and learning a company’s culture. “Some people are trying to pass a problem on to us,” Kozlowski says, “and some people are simply looking for a good home for their company and employees.”

When a deal does fall through, even one of a significant size, “it’s not emotional,” says the Tyco CEO. “You’re better off not doing a deal than doing a deal you’ll regret,” he says. Conversely, he insists that completing a major acquisition-more than 120 major ones have been announced under his watch-is strictly business, too. The thrill, in other words, is gone. “It’s not as exciting as watching Bernie Williams hit a home run in Yankee Stadium,” says Kozlowski, who enjoys flying helicopters and piloting his 130-foot, J-class racing sloop in his spare time. “I get much more excited watching our stock price go up than I do by a deal. That’s the real report card-how we’re doing for our shareholders.”

the most sought-after
account of the season

CEO, Ogilvy & Mather Worldwide

On a sunny afternoon in late June, Shelly Lazarus headed west from midtown Manhattan to the Paramus, NJ, offices of AT&T Wireless, the newly independent offspring of AT&T Corp. With her were a dozen staffers from Ogilvy & Mather Worldwide, the advertising agency she’s directed since 1996. The occasion: the final round of a four-month, high-stakes competition for the mobile phone company’s advertising account.

With annual billings estimated at $400 million, the account would rank as a coup in any season. This year’s soft economy turned it into the most sought-after account of the first three quarters, and perhaps, the year. In contrast to the dot-com-fueled splurge of the late 1990s, clients scrambling to cut costs this year have frozen or reduced their ad budgets. New business has been relatively scarce. (The last major win for Ogilvy, a unit of WPP Group, had come in September 2000 when it captured the Motorola account with estimated billings of $150 million.) As a result, agencies that were struggling to hire a year ago have reversed course and are cutting staff.

Still, Lazarus insists it wasn’t just the prospect of boosting revenues that stirred her interest in the wireless account. The technology itself and the evolving nature of the mobile phone business were equally compelling. “They’re a new company with a great brand in an exciting category that’s exploding with possibilities,” she says. “It doesn’t get better than that for people who are interested in brands and marketing and advertising.”

In its final 2 1/2-hour presentation, the Ogilvy team sketched out a marketing vision that emphasized long-term brand-building over specific ads or campaigns. Lazarus herself promised to remain involved in the account’s management. “I am there very much as the guarantor of Ogilvy resources,” she says.

Lazarus, 53, also played up the personal relationships between executives from the two companies. “We will be so disappointed if we wake up tomorrow and find out we’re not the agency,” she told the gathering of three-dozen AT&T wireless execs, including CEO John Zeglis, “because we already feel that we work with you and we’d miss you if we weren’t.”

It was close to 5:30 p.m. when the meeting ended. Yet most in the audience lingered for another 45 minutes or so, talking one-on-one with Ogilvy team members. “That meant to me that we had engaged intellectually with each other,” says Lazarus. But the Ogilvy CEO knew better than to take anything for granted. Clients could be fickle, a lesson she’d learned in 1991 when American Express Co. all but abandoned Ogilvy, only to return a year later after a charge-card campaign created by a rival agency was panned. “Having been through new business [presentations] enough times,” she says, “you never know how it’s going to come out until the decision.”

Two weeks later, Lazarus had just landed in Omaha, NE, where she was to meet the CEO of another client, Ameritrade. When she called her office, Lazarus’s assistant gave her the news: Ogilvy had landed AT&T Wireless-beating out Foote, Cone & Belding and TBWA/Chiat/Day. “It was a great win,” says Lazarus, who congratulated her staff by cell phone as they celebrated over lunch with the new client in New York. “We don’t do a whole lot of new business, but when we go after it, we go after it very seriously.”

with a larger competitor

Bill Lowrie
Former co-deputy CEO, BP Amoco

Big Oil was growing bigger in 1998.

Seeking to boost its bottom line, British Petroleum PLC spent more than $52 billion for smaller rival Amoco Corp.

Industry observers scrutinized the deal, poring over details such as the combined company’s production capacity, market capitalization, and global reach. But what sticks in the mind of Bill Lowrie, who served as a deputy CEO for the merged companies, was less obvious but equally critical: the different structures at the two firms.

Lowrie, Amoco’s president before the merger, got to see first-hand the differences at the two companies. He spent the better part of a year working on the merger’s details as he shuttled between Amoco’s headquarters in Chicago and BP’s central office in London.

While Amoco executives oversaw clearly defined business units, BP managers were expected to work in a group, across divisions. The differences concerned some at Amoco, including Lowrie, who wondered what would happen to their positions in the merged company.

Once BP and Amoco merged, Lowrie was named co-deputy CEO along with another BP executive. Lowrie was to oversee the chemicals, refining, and marketing divisions and report to CEO Sir John Browne. But after a few months, he found the co-deputy CEO position unworkable.

Lowrie and other executives had to determine how the merged company would set up performance plans, project evaluations, and compensation schedules, but there were too many executives trying to do the same tasks. “I think you find yourself getting in each others’ way,” he says.

Lowrie, whose career with Amoco began in the Louisiana oil fields in the 1960s, decided to retire at the age of 56. He insists he has no ill feelings surrounding the merger or his decision to leave.

“I don’t think co-whatever you want to call it works well,” he says. “Just get one person and get on with it. That’s the way I looked at it.”


Kenneth Cleveland, CEO, Hauser

In the summer of 2000, Hauser Inc.’s stock was taking a beating, with shares trading below $1 for three months running. Then in October, the really grim news arrived: The NASDAQ National Market planned to de-list the company, relegating it to the low-volume Over The Counter exchange.

While not a surprise, the move was clearly a blow to the Boulder, CO-based maker of dietary supplements. Investors were unhappy. Employees were left with worthless stock options. The company’s image was one of a business on the ropes.

“It’s a negative all the way around,” concedes CEO Kenneth Cleveland.

Unlike some companies threatened with de-listing, Hauser opted not to appeal the exchange’s decision. “The [financial] fundamentals,” says Cleveland, “just were not there.”

Instead, the 68-year-old CEO has turned his attention to the basics, focusing on boosting sales and cutting costs. The staff of 350 was trimmed by nearly a third, unused real estate was sold off, and other facilities were consolidated.

In facing the company’s difficulties head-on, Cleveland also has realized the importance of communicating with employees, investors, and suppliers. “You have to be honest. Say: €˜Look, we have these problems’ and explain what the issues are.”

Despite the sluggish economy, Cleveland remains optimistic. His new goal: to be profitable again by year’s end. Achieving that would be a step toward his long-term goal of once again being listed on the NASDAQ or another exchange. The key, Cleveland knows, will be keeping his focus on the fundamentals. “If you grow those,” he says, “you get back on the exchange you want.”

a hostile takeover

Larry Stevenson
Former CEO, Chapters

As Canada’s book-selling king, Larry Stevenson oversaw an expanding empire. The CEO of Chapters Inc. already operated more than 300 stores nationwide in 1998 when he began selling over the Internet as well. A year later, Stevenson launched a new wholesale division. Chapters, with its commanding 30 percent market share, had competitors on the run.

But in November 2000, the scenario quickly shifted: Suddenly, it was Chapters, which had sales of $455 million, that was being chased. A group that included rival Indigo Books & Music Inc. had launched a hostile bid.

Stevenson was familiar with such maneuvers. Before taking the top job at Chapters, he’d worked as a consultant for Bain & Co., helping executives acquire other companies. Still, he says, “it’s a little different when you’re in the eye of the storm.”

Even so, Stevenson felt confident he could defend Chapters. His lawyers insisted the takeover bid would never win approval from Canadian antitrust regulators. He was certain he would find a “white knight” who would allow him to retain control of the company.

What the 45-year-old executive hadn’t expected was how time-consuming that search would become. After the hostile bid arrived, Stevenson spent months looking for a backer with deep enough pockets to stave off the takeover. “There were just never enough hours,” he says of the tumultuous period. “If any potential white knight wanted to see you-anywhere-you got on a plane.”

With the company’s future at stake, other management tasks fell to the side. Stevenson acknowledges that he had “nothing to do with the stores” during that time. With his attention elsewhere, the hostile bid also proved unsettling for the retail chain’s 6,000 employees. “Their concern,” says Stevenson, “was, €˜will I have a job when the merger goes through?'”

In the end, Stevenson found his would-be rescuer in a Canadian electronics retailer. But that company’s bid ultimately fell short of the aggressive offer from Trilogy Retail Enterprises LP, a private company controlled by Indigo’s CEO and her husband. Ousted by the new board, Stevenson plans to spend the next year studying in France-and no doubt mulling over lessons from the recent booksellers’ war.

One that’s already clear to him: Never take anything for granted in the midst of such uncertainty. Despite his attorneys’ assurances to the contrary, Canadian regulators in June gave their blessing to a Chapters-Indigo merger. “If advisors say it’s not possible,” Stevenson says, “it is possible.”

a shareholder lawsuit

CEO, American Bank Note Holographics

American Bank Note Holographics Inc.’s future looked grand in the summer of 1998. Customers such as Visa, MasterCard, and the U.S. government were using the company’s holograms on cards and documents to guard against fraud. Sales appeared to be booming, and the company had just gone public, raising nearly $116 million.

But not everything was as it seemed. Figures used for the IPO, it turned out, had been significantly misstated and profits were well below what the company had reported. The misdeeds, not surprisingly, triggered a raft of shareholder lawsuits, with investors accusing the Elmsford, NY-based company of fraud.

Inheriting this mess was Kenneth Traub. Hired as CFO shortly after the company went public, Traub was quickly named CEO following the ouster of the previous chief executive. His charge: to repair the company’s reputation, and chart a course for a profitable future.

“It’s bad enough for any company to commit fraud,” says the 40-year-old executive. “But it’s worse if your business is about fraud prevention.”

In launching his rehabilitation mission, Traub quickly realized he wouldn’t get far until the shareholders’ lawsuits were cleared up. “The exposure was huge,” he recalls. The lawsuits “were all people saw and it really gave the impression that the company was in bad, bad shape.”

After a year or so of negotiations, a class action settlement was reached. The deal, which included a $12.5 million insurance payment to plaintiffs as well as the issuance of company stock and warrants, came at a hefty price. But relegating the lawsuits to the past was critical for the future. “The sooner you can focus on the business, the better,” says Traub. “Litigation is not a value creation exercise.”

about the market from your kids

Ron Bension
CEO, Gameworks

Ron Bension and his young son, Alex, visited a video arcade last year where they played one of the newest games, a contest in which the object was to blast ghouls to smithereens.

As the 8-year-old chatted about the game on the way home, Bension, 47, began to feel uneasy about its violent imagery. “I said to myself, €˜maybe that’s not right. I don’t think I should have allowed him to play that.'”

Over the coming months, Bension’s second thoughts would influence not only the video games Alex was permitted to play, but also the operations of GameWorks, a Glendale, CA-based chain of entertainment and dining centers in the U.S. and overseas.

Eventually, Bension changed the company’s policy regarding violent-themed video games, restricting them to players who are at least 16 years old.

The CEO insists his parenting preferences don’t always dictate corporate strategy. But he acknowledges that spending time with his son and 19-year-old daughter gives him a window into the minds of younger customers, and what might click with them. “Understanding what they watch and what they wear and what they are doing is great insight for me,” he says.

Consider another change at GameWorks, a joint venture of Sega Enterprises and Vivendi Universal SA. The chain recently opened several bowling alleys, a move that Bension felt more confident about hearing his daughter, Jacqueline, gush about “bowling and how hip it is.”

Bension also picks up clues about coming trends by watching people in public spaces such as airports and shopping malls. But he still thinks his best research happens at home. “Having both a boy and a girl, I’m learning what is happening daily in the marketplace,” he says. “It’s really insight into market-driven retail issues that we can put into play in our stores.”

200/365 days of the year

Ronald Dollens
CEO of Guidant

Ronald Dollens’ flight from San Jose, CA, to Chicago didn’t start off well: After boarding the commercial jet, the CEO of Guidant ended up sitting for an hour on the tarmac, waiting for a delayed pilot.

Then things got worse: After landing in Chicago, Dollens had minutes to make his flight to Indianapolis. So he sprinted through O’Hare’s congested corridors, boarding just before the gate shut. Then he had to wait again. This time, it was a technical problem with the jet’s navigation system.

Dollens arrived at his home in Indianapolis at 8 p.m., nearly three hours later than planned.

While hardly unique, Dollens’ recent day of delays illustrates the maddening nature of life as a globetrotting executive. It’s true, of course, that some chieftains enjoy the luxury and freedom offered by private jets. But plenty of others find their tightly packed schedules derailed by cancelled or postponed flights.

Like most road warriors, Dollens’ heavy travel schedule serves many purposes, from meeting with clients and employees to chatting with lawmakers and Wall Street analysts. Days typically begin with a 6 a.m. breakfast and end around 10 p.m. with a call home.

To make sure the medical device company’s operations run smoothly in his absence, Dollens holds biweekly meetings with top managers at Guidant’s Indianapolis headquarters. The setting of clear short- and long-term goals frees him from the need to constantly monitor managers’ progress.

“It’s seldom where I have to talk to [company executives] when I’m on a trip unless it’s an emergency,” he says. “To think you would try to run an operation that would require you to be connected to the daily and hourly decision process and travel that much would be impossible.”

Time on the road does exact a price. The 53-year-old CEO doesn’t see his wife as often as he’d like, although she occasionally accompanies him. And he can’t avoid thinking of the next trip. “The two-places-at-one-time feeling happens all the time,” he says.

the Malcolm Baldrige

Bill Enloe
CEO, Los Alamos Bank

Bill Enloe, CEO of Los Alamos National Bank, heard the good news last November during a brief phone call from then-U.S. Commerce Secretary Norman Mineta: The New Mexico bank had won the Malcolm Baldrige National Quality Award, one of the most coveted prizes in business.

The $660 million-asset bank had been chosen for its customer service and financial strength, as well as its support of Los Alamos after fire devastated much of the town last summer.

The wind-whipped blaze, which began as a “prescribed burn” set by the National Park Service, grew into New Mexico’s largest-ever wildfire and destroyed 200 homes. The bank responded by offering no-interest loans to victims and negotiating with Fannie Mae to suspend mortgage payments on lost homes. It also distributed food and clothing, and paid employees who helped in the relief effort.

For Enloe, receiving the Baldrige award marked a high point in his 30-year career with the financial institution. “It was momentous,” he says, recalling the day he learned of the honor. “After the announcement, you could hear the buzz all over the bank.”

Yet the 53-year-old CEO insists the award’s biggest benefit wasn’t the headlines it garnered. The real value came months earlier, as the 200-employee bank put together its application. That task forced the bank to take a hard look at its operations, Enloe says, and “put some time frames on improvement in certain areas.”

Take the loan department, for instance. Bank managers saw that much of the paperwork accompanying loans was lost or incomplete. The problem? Los Alamos’ loan processing system was too decentralized. “There was a department for this document and for that document,” Enloe recalls. So the division was reorganiz

About Jennifer Pellet

As editor-at-large at Chief Executive magazine, Jennifer Pellet writes feature stories and CEO roundtable coverage and also edits various sections of the publication.