DATE: 04/10/09



GDF Corp was a leader in the telecommunications industry, offering network equipment and
enterprise solutions to a broad range of customers around the world. Customers included
telephone service providers, cable companies, Internet service providers, military organizations,
and other government agencies. GDF was known throughout the world for the technological
sophistication and quality of its products, as well as for the excellence of its research and
development team. As a multinational corporation, GDF faced fierce competition from
European, North American, and Asian telecommunication equipment providers. The company
was headquartered outside of the United States and had a strong national identity.

In many ways, the story of GDF was typical of the broad telecommunications industry. In the
late 1990s, the company expanded rapidly, due largely to technological innovations and
explosive global demand for network equipment. In order to remain competitive, GDF
supplemented its internal research and development efforts with the acquisition of small
companies in specialized niches of the telecommunications industry. GDF funded these
acquisitions through the issuance of new shares. Revenues, profits, and the company’s share
price all surged.

In 2000 and 2001, suddenly and unexpectedly to senior company executives, the company faced
a sharp reversal of fortune as the entire industry went into severe retraction. Demand for GDF’s
products, which had been robust just a few years before, dried up, and the company’s once-rich
operating margins turned quickly into losses. The company’s cash position deteriorated, and
GDF faced the very real possibility of bankruptcy. To maintain financial solvency, the company
was forced to undergo a broad restructuring, including the layoff of thousands of employees.
Professor David F. Larcker and Brian Tayan prepared this case as the basis for class discussion rather than to
illustrate either effective or ineffective handling of an administrative situation. The Rock Center for Corporate
Governance is a joint initiative between the Stanford Graduate School of Business and the Stanford Law School.

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in 2003. By late 2008. During the next two years. In 2002. Goodrich’s efforts appeared to pay off. which had traded as high as $100 per share (on a dollar-equivalent basis). Max Grosser. consolidating production facilities. Ricardo Guzman. the board of directors decided to initiate a thorough search process to replace Goodrich as chief executive officer of the company. but the company was still operating far below the level envisioned by the board of directors and institutional investors. non-executive directors. as a financial operator. As a result. Several board members began to worry that Goodrich had not set a clear technological and strategic course for the company. or the Technologist CG-15 p. James Lindsay (technology). with Justin Goodrich. In making the appointment. however. the Business Builder. and restore its public reputation and credibility with the investor community. reversing the buildup that occurred under Grosser. the board of directors hoped that Goodrich would be able to successfully navigate a financial turnaround. THE CEO SEARCH GDF Corp did not have a formal succession plan in place at the time it decided to replace Goodrich. Also. and reducing overhead. Goodrich had stabilized GDF’s market position. would serve as the head of the committee. the company’s turnaround stalled. Through internal surveys. fell to under $5 by the end of 2001. he focused on streamlining GDF’s research and development process. chairman of the board. the company announced that it was replacing its larger-than-life chief executive officer. All four men were independent. Goodrich moved quickly to reduce the company’s cost structure. particularly those in research and development. the company was able to achieve positive—though slim—operating margins. The board would hire an independent search consultant to look both inside and outside the company to find the individual best qualified to run GDF over the next five to seven years. but GDF’s interest coverage improved as Goodrich aggressively paid down debt. were beginning to lose confidence in Goodrich’s leadership. the board felt that Goodrich. 2 Adding to the company’s problems was the revelation that GDF had used aggressive accounting practices to inflate its results. . and Roland Cathcart (logistics and transportation). Goodrich had served as chief operating officer of the company and was known for his financial acumen and high personal integrity. As a first step. three members of the nominating and governance committee agreed to serve on the search committee: Maury Gelt (bank executive). At first. Net income continued to be weighed down by restructuring charges and asset write-downs. Although revenues decreased due to a prolonged industry slowdown. who had a background in electronics and manufacturing. He also divested non-core businesses. was not spending enough time face-to-face with key customers.Selecting a CEO: The Leader. the board discovered that employees. In addition to Guzman. In particular. The price of the company’s stock drifted up to the high single-digits per share (see Exhibit 1 for historical financial information). The company’s stock. Guzman. improve the company’s internal financial controls. convened a search committee which would be responsible for hiring an independent search consultant and for overseeing the recruitment process.

performer or leader. The philosophy of DH Associates. As a first step. individuals who were nationals of GDF’s home country should be given added consideration. She also looked for those with general management expertise. to identify specific individuals to be included in the search. based on its years of experience. The board of directors urged that. Hunt looked for individuals with related industry experience. Some of these worked at competitors of GDF and declined out of a deep sense of loyalty to their organizations: loyalties both to their companies’ home countries and to the technology standards that they believed were . 3 Guzman recommended that the committee retain Diana Hunt of DH Associates to manage the search process. and supplier organizations. telecommunication service operators. Hunt’s approach was not to divulge the company’s identity until she had confirmed both the candidate’s qualifications and interest in pursuing the position.Selecting a CEO: The Leader. Prospects came both from within the company and externally. was that a person’s past performance was the most reliable indicator of what that individual was likely to achieve in the future. with the quality of the individual his company ultimately hired. or the Technologist CG-15 p. In compiling the target list. including GDF’s competitors. Hunt agreed to perform the GDF search on her company’s standard terms: a fixed fee of $1. as well as each member of the board. Based on these inquiries. Hunt contacted each individual to discuss the opportunity and gauge their interest. He had experience working with Hunt on a previous search and was pleased with the quality of candidates she brought him and. and with strong general management experience. corporate customers. Hunt interviewed an exhaustive set of professional contacts that she has built up over the years. If an individual had been an effective thinker. the Business Builder. It included one current GDF executive. After finalizing the list. if possible. as well as executives from telecommunication equipment providers. These sessions allowed her to become intimately familiar with the requirements for a successful candidate and to better understand the strategic objectives of the company. She shared this document with qualified individuals after discussing the opportunity with them in detail. as other search consultants charged one-third of first-year expected cash payments (salary plus target bonus). Hunt used this information to draft a “position specification document” that outlined a description of the company. the responsibilities of the CEO position. Guzman felt that the fee was fair. two former GDF executives. Hunt was looking for an individual who had a history of successfully managing technology and complex organizations. After her initial conversations. that individual would likely bring those same qualities to its subsequent employment. in particular.) The next step was to develop a comprehensive list of individuals with the required experience and proven track record to serve as the CEO of GDF. Three of these individuals were nationals of GDF’s home country (see Exhibit 4 for the candidate list).5 million plus expenses. For the GDF search. which could amount to $4 million. and the professional and personal qualifications expected in the ideal candidate. Hunt engaged in one-on-one discussions with several key executives at GDF. (See Exhibit 2 for the position specification document and Exhibit 3 for the profile of the ideal candidate. Hunt developed a list of candidates. seven candidates declined to continue.

earning a bachelor’s degree in mathematics. in 1992.000 low-producing employees from the organization and replaced 90 percent of top management. After graduation. a shift in business focus to improve revenues and market share. joining as a corporate auditor. He learned quickly that problems existed throughout the operation: financial discipline was weak. For example. Jensen was able to increase inventory turns. and added a rigorous but streamlined set of financial controls. He also removed over 1. Jensen was very successful in this position and two years later moved to one of GC’s fastest- growing subsidiaries. improve volume. Jensen came to know the intimate details of many of GC’s inner workings. Hunt eliminated an additional 15 that she felt. He also removed approximately 700 low-performing employees and replaced them with 500 high-performing employees. As a result. Within six months. and reduce the business’s cost base. The division ultimately grew market share and profitability. the new team had a mindset that it could succeed. Others who declined did so for personal reasons or from a feeling that GDF would not make a good fit for them. decrease unit prices. GC Capital. Importantly. At each stage of the game. Craig Jensen Craig Jensen was born in Europe but moved with his family to the United States in 1970. As a first step. 4 superior to those of GDF. and during this time period was given a wide range of responsibilities. he oversaw a comprehensive review of the strategy and management personnel. did not meet the qualifications of the ideal candidate. reduced the cost structure. Jensen left GC Capital and took a senior position in one of GC’s businesses. and unacceptably low market share. slowing revenue growth.Selecting a CEO: The Leader. The situation was one that Jensen had been asked to fix before: operating margins below industry average. a reduction of the cost structure. Having reduced the list to 29 potential candidates. he set a new strategy. implement a plan or strategy. His assignments were both in the United States and in Europe. Over the next two years. The success earned him . he was asked to make recommendations on how to improve these businesses. Jensen took his first job with GC. He was asked to improve the profitability of asset portfolios. the operation’s balance sheet was highly leveraged. for some reason or another. Among these were three whom she recommended to the search committee as the most qualified finalists. the Business Builder. and morale and productivity were low. Furthermore. whether it was through a revamp of the supply chain. Jensen showed an ability to isolate the problem. and for some period of time. she had narrowed the list down to 14 viable candidates. The corporate auditor function at GC was quite prestigious. he was asked to turn around GC Capital’s truck leasing operation in Europe. he and his family had to relocate to Europe. He remained at GC Capital for the next 15 years. He was also asked to turn around struggling operations. In 1996. He attended the University of Michigan from 1971 to 1975. standing head-and- shoulders above the rest. Through these reviews. relocating to Asia. in that Jensen and his team were required to perform financial and strategic reviews of many of the top businesses within the company. he played on the rugby team and was granted a partial athletic scholarship. or the Technologist CG-15 p. despite a tough industry environment. as corporate auditor. and then execute with success. While in college. or a realignment of organizational work processes.

“Employment Law and Duties to One’s Former Employer. The company replaced him with a new CEO from outside the company. he spent more than half of his time developing leadership talent. The agreement also gave CompTel the right to reclaim profits earned through option exercises. the chief executive officer of CompTel retired.Selecting a CEO: The Leader. . investing in research and development. he was also not allowed to directly participate in the solicitation of business from customers of his former employer (although members of his team were allowed to do so). CompTel had been losing market share in several key businesses. Much of this cost disadvantage was due to the fact that Jensen’s predecessor had made a huge bet to increase production capacity right before a cyclical downturn. eliminating production quality issues. operating expenses were as much as 20 percent higher than those of CompTel’s (April 15. CompTel was a world famous telecommunications company. in one division. and improving customer relations. however. asking his management to accelerate growth and reduce costs. Over the previous few years. Sales and margins improved in all businesses and all geographic locations. kept him out of the job. he had accomplished an enormous amount through his leadership and through the creation of a culture of accountability. See: QuickMBA. In his opinion. he was not allowed to solicit employees of his former employer with the intention of hiring them (although they could contact him). In late 2003. As CompTel and GDF competed in a few business subsidiaries (15 percent overlap). Internal politics at the board level. For the first time. Jensen had signed a two-year non-compete agreement with CompTel upon his resignation from the firm. The results were very positive. Jensen was approached by corporate recruiters who persuaded him to leave GC to become the president and chief operating officer of CompTel.quickmba. The agreement gave the company the right to claw back $11 million of the $17 million that was paid to him when he left if he took a job with an industry competitor. which amounted to another $11 million. Jensen continued with his operational success. believing that he should have been selected for the position. with both consumer and commercial businesses. Jensen replicated this approach across all of CompTel’s six divisions. or the Technologist CG-15 p.” http://www. this time to president of that division’s global operations. In 2000. Jensen felt slighted. Operating margins improved by over 12 percentage points in just three years. As president. Jensen and his team concentrated their efforts on building revenue growth. the Business Builder. CompTel posted earnings in 2003 that were the highest in corporate history. reducing operating expenditures. he would expect to be made whole on any money that he was forced to forfeit as a violation of the agreement. Jensen believed that the payment could be negotiated down from a strict non- compete agreement to a non-solicitation agreement. 1 Under a non-compete agreement. but he also earned the reputation for being an individual who could develop effective teams.1 However. Jensen was not allowed to take employment with a firm that competed with his former employer. He advised the board of directors that the company did not need both a CEO and COO and that he would resign (see Exhibit 5 for Hunt’s analysis and appraisal of Jensen’s qualifications). For example. GDF faced the risk that the non-compete might be triggered if it ultimately hired Jensen. 5 another promotion. Under Jensen’s watch as chief operating officer. 2008). Under a non-solicitation agreement. To improve competitive positioning. he reported directly to the CEO of GC.

Most electronics and technology companies had poor manufacturing capabilities. and expertise to win contracts with major international companies. Immediately upon taking the helm of the company. lacking the size. he returned to school and earned an MBA from a prominent U. the company grew from revenues of $15 million and a net loss of $3 million to revenues of $22 million and a profit of $4 million. Richardson joined a small electronics wholesaler based in California. They offered him a 5 percent equity stake as added incentive to grow the firm. He stayed there for two years and was then lured away by a small California company called Technology Works. After a year on the board. When the company was sold in 1984. The company’s balance sheet was also highly leveraged. and the necessary talent to drive improvement was seldom available. He reduced overhead and made the decision to raise capital by taking the firm public. manufacturing processes did not receive the attention they needed. Richardson was hired to be the company’s vice president of manufacturing. The CEOs rarely visited the production plants. because the CEOs of those companies had technical rather than manufacturing backgrounds. Richardson recognized that it presented a long-term opportunity. In 1988. the company’s founders sold the firm to a larger regional company. Over the next 14 years. The company’s investors hoped that Richardson’s expertise would provide guidance to management on how to improve. the Business Builder. Upon graduating from business school. He attended Hamilton College from 1970 to 1975. He recognized that a weak balance sheet impeded the company’s ability to grow. and Richardson made his first significant financial gain. Contract Builder was a middle-tier contract manufacturing company. and Asia.Selecting a CEO: The Leader. For this reason. Richardson’s manufacturing improvements were largely responsible for the sharp increase in profitability. Despite the company’s shortcomings. the company made a series of bold moves that eventually catapulted Contract Builder from a $50 million contract company primarily located in the U. Richardson took a position at a large technology company. the investors in Contract Builder were impressed with Richardson’s combination of technical and managerial knowledge and asked him to become CEO of the company.S. Technology Works was a niche supplier of electronics components and Richardson came to know the company well through his previous job. Richardson did just that and on a scale that original investors barely imagined possible. Richardson focused on its financial condition. In 1977. During the two years that he served at Technology Works. Europe. business school. scale. Proceeds . In the meantime. where he oversaw production in one of their electronics subsidiaries. earning both a bachelor’s and master’s degree in history. any outside firm that could provide manufacturing services on a contract basis was in a favorable position to deliver value to these companies and at the same time profit greatly.S. Richardson was asked by venture capitalists to join the board of the privately held Contract Builder Company. Under Richardson’s leadership. to one with revenues of over $10 billion and operations in dozens of countries in North America. or the Technologist CG-15 p. 6 Frank Richardson Frank Richardson was born in Pennsylvania but moved with his family to New England where his father purchased a heating and air conditioning business. He had also established a reputation in Silicon Valley as a solid operator. As a result.

after 13 years as CEO. particularly within a technology company. he could demonstrate Contract Builder’s value proposition first hand and deepen his relationship with those customers. It was at this point that. Contract Builder was one of the largest suppliers of components for cell phones. Richardson also embarked on an aggressive mission to gain prominent. As he did not have specific plans for what he would do after leaving the company. For the next 12 months. telecommunications. he moved to the United States. he carefully groomed a board-approved successor whom he felt would take the company into its next phase of growth. After a while. Richardson stated that he felt 14 years was long enough for any one person to serve as CEO. ManuTech was a manufacturer of network communication products. Ratnam decided that he wanted to work on the practical application of technology to commercial products. Varish Ratnam Varish Ratnam was born in a village outside of Bangalore. Ratnam was a superb student. all the while careful that each one added to or complemented Contract Builder’s existing operations. video game consoles. He expected to remain chairman of the board throughout 2004. and other electronics equipment. and computing corporations. he took a position with ManuTech. announcing the closure of over 100 factories around the world and taking $1. rather than the theoretical research he had been engaged in.5 billion in write- offs. India. printers. where he worked for four years on network communication technologies. which was then under government ownership. Throughout the 1990s. 7 from the offering were used to repay debt and to invest in manufacturing capacity. and . where he transitioned to electrical engineering. In some cases. Richardson announced his intention to step down from the position. Such a move allowed for improved coordination on inventory and production and a reduction in transportation costs. Ratnam’s first job was as a researcher in the famed Bell Labs. however. Richardson recognized that it had the potential to seriously impact Contract Builder’s business.Selecting a CEO: The Leader. completing his studies in 1980. he acquired competitors who were at one point larger than his own company. In 1984. In explaining his resignation.” in which Contract Builder factories were located adjacent to those of its key suppliers. He and his team also used the opportunity to redesign the company’s supply chain. signing contracts with many of the world’s largest electronics. One early success was an agreement to provide manufacturing services for a major European telecommunications company. located in Massachusetts. he was pleased to be contacted by GDF. Richardson demonstrated an ability to win business. He earned first a master’s and then a PhD in electrical engineering from the Massachusetts Institute of Technology. By 2002. the Business Builder. He reacted quickly to limit any fallout. Richardson also extended the company’s capabilities by executing a series of acquisitions. which had been a major customer of Contract Builder (see Exhibit 6 for Hunt’s analysis and appraisal of Richardson’s qualifications). His father worked for the local telephone company. conceiving of vertically integrated manufacturing “malls. which gave Contract Builder high visibility on that continent. international clients. When the technology downturn hit in 2000 and 2001. receiving both a bachelor’s and master’s degree in physics from a prominent Indian university. These “integrated manufacturing malls” were established in both Asia and Europe. computing equipment. or the Technologist CG-15 p. In 1975. Richardson calculated that once he got in the door with large companies.

whose business he came to know very well.S.’s revenue base by 40 percent. That changed. By . ManuTech was acquired by EuroTel. In this capacity. Ratnam was made president of EuroTel’s U. where the division was headquartered. however. overseeing a $500 million research and development budget. and he and his family moved back to Massachusetts. He was excited by the fact that his engineers worked right next door to the manufacturing facilities. 8 Ratnam served as a product manager for the company. Within two years. the Business Builder. Ratnam was steadily promoted within ManuTech. The experience allowed him to broaden his knowledge of the company’s product offerings. he was able to beat analyst estimates for earnings per share for every quarter with the company. EuroTel senior management quickly recognized Ratnam’s technical skill. He took the greatest pride in the fact that he was able to bring back motivation to a company that had lost its competitive drive. broadband was not yet a viable commercial product and was instead a concept technology. eventually obtaining the title of vice president for research and development. Up until this point in his career. As COO. Notwithstanding the acquisition and tough industry conditions.-based Research Co. By 2001. he was promoted to chief technical officer for EuroTel’s U. Ratnam was viewed more as a technology expert and less as a commercial manager. Ratnam decided to remain with the company. With one exception. when EuroTel decided to place Ratnam in charge of the company’s nascent broadband division in 1995. he was responsible for approximately one-third of EuroTel’s income statement. One of Ratnam’s first moves was to acquire a company whose products complemented and helped to diversify those of Research Co. The acquisition increased Research Co. with over $1 billion in revenues in 2001. or the Technologist CG-15 p. One of those customers was GDF. As president of U. In 1991. Having demonstrated his managerial skill. EuroTel was a multi-billion dollar telecommunications company and well known within the industry for its advanced research and development capabilities.Selecting a CEO: The Leader. he was given responsibility for the development of all products company-wide. operations. Ratnam left EuroTel to become the chief executive officer of U. and the pace at which his career took off accelerated. Ratnam succeeded in developing the broadband product and introducing the technology into the market place where it gained significant market share.S. he had full responsibility for the income statement. primarily because of his nationality: he was not a citizen of EuroTel’s home country and pressure was high within the company to maintain a national identity. allowing him to witness first- hand the movement of products from design to production. This company was a developer of cutting-edge telecommunication and network equipment. Within one year. He also oversaw the acquisition of complementary businesses and demonstrated an ability to realize cost savings. and restructure struggling operations. it became clear that Ratnam would not be promoted to the CEO position. Ratnam was promoted to the position of chief operating officer of EuroTel’s global operations. operations. He also oversaw technological strategy and maintained relations with key global customers. division. engage with senior managers at a strategic level. As a result.S. He and his family moved to Europe.S. Ratnam was able to generate breakeven profitability in 2002 and $200 million in net income in 2003. By 1999. At the time. For that reason. Ratnam was asked to take the business and build it from scratch.

THE CEO SELECTION The GDF CEO search committee arranged to meet the three candidates on March 15. QUESTIONS 1. Assume that you are on the board of GDF. or the Technologist CG-15 p. along with their recommendation for who should be selected. he was able to engender a culture of collegiality. and high expectation of what the company could achieve. strong accountability. Gelt. Be prepared to defend all elements of your compensation package. and Cathcart were impressed with all three of the candidates. By the end of the day. Lindsay. Discuss the positive and negative aspects of the process used by Diana Hunt to develop the candidate list in Exhibit 4. Having read in detail Hunt’s reports on their backgrounds and achievements. Guzman. Which candidate would you select for CEO? Provide a rigorous justification of your choice. the search committee would dedicate the time less toward a discussion of each candidate’s history and experience and more toward a strategic discussion of how they expected to fix GDF. . Provide an evaluation of whether the job description in Exhibits 2 and 3 describes the type of CEO that is required for this turnaround situation. They planned to take a summary of the candidates to the full board of directors. where they would meet with each one individually in two-hour sessions. He believed firmly that the company could recover from its current difficulties and that it could reestablish a leading position in the industry. He had a strong interest in joining GDF. 4. 3. Ratnam was employed at Research Co. 2. They arranged for all three executives to fly to GDF’s headquarters. 2004 to make their final selection. Ratnam was very respectful of GDF’s research and development and its products. when approached by Hunt about the GDF position. the Business Builder. Ratnam felt very confident that he had the skill set and knowledge to lead that turnaround (see Exhibit 7 for Hunt’s analysis and appraisal of Ratnam’s qualifications). Hunt would begin a detailed reference check and help negotiate the starting pay package for the new CEO (see Exhibit 8 for the current compensation packages of each candidate and Exhibit 9 for benchmark compensation information from GDF’s industry peers). 9 making several changes in structure and work process.Selecting a CEO: The Leader. because it was a company he knew quite well: GDF was an important customer of his both at EuroTel and Research Co. Once approved by the full board. Develop a compensation package that will attract your final choice for CEO and provide the correct executive incentives from the perspective of shareholders.

800 1. Operating profit and net income excludes certain charges for impairment of intangible assets.800 1. the Business Builder.S.Selecting a CEO: The Leader.800 3. or the Technologist CG-15 p.0% 14.100 1.0% 12. 10 Exhibit 1 GDF Corp: Historical Financial Information (1997 – 2003) ($ in millions) 1997 1998 1999 2000 2001 2002 2003 Revenues 2.800 Operating Profit 240 338 504 596 -336 -90 360 Operating Margin 12.0% Net Income (Loss) 100 140 220 280 -520 -200 10 Debt 260 340 360 240 850 820 840 Equity 1.800 EBITDA 130 180 308 420 -360 -60 30 Capital Expenditures 75 100 120 200 180 45 40 Share Price 10 20 55 100 20 5 7 Note: Financial information in U. .600 4.000 2.500 600 1.5% 14. dollar equivalent.700 3.000 4.2% -12. Source: Company annual reports.200 2.700 1.0% -5.0% 2.

or the Technologist CG-15 p. the Business Builder. competitive and customer-focused organization. in general. This activity will also require a commercial sense around such subjects as when the company should go it alone. the CEO will face difficult trade offs. There are several specific core challenges that the CEO will need to take on. the CEO will. S/he will need to work constructively with the investment community on an ongoing basis and re-establish investor confidence in the company. once again. particularly around the broad geographic reach of the company’s support and R&D functions. in many cases. not only as a major sourcing and supply chain hub. In other cases. DH Associates. the new CEO will need to oversee its management in a “value added way.” being experienced in and prepared to make big technology bets for the company. As the company has recently overcome accounting issues that have affected the company’s historically proud self- image (as well as external stakeholder confidence). as well as create buy-in quickly. In doing so. In some cases. creating a team atmosphere in which the management team addresses bad news and critical issues in a timely and effective manner. that decisions need to be taken quickly and will be clearly communicated in order to instill (and. It is expected. The new CEO will need to address organization and people issues. The new CEO will need to establish a clear strategic course for the company. the new CEO will need to do an assessment of all the company’s businesses and products and make some difficult decisions on the company’s business portfolio. with particular focus on ensuring that the organization is.Selecting a CEO: The Leader. Additionally. The new CEO will need to address the company’s cost structure and drive down costs. enterprise and government customers. . It is therefore critical that an atmosphere of openness and trust be established by the new CEO. from time to time. the CEO will need to assure that effective marketing plans exist to penetrate and serve the company’s telecom service. need to weigh in on debates over standards as well. As a prerequisite. it is equally expected that decisions be taken with prudence and wisdom. s/he will need to work with regulators and other officials in several countries to be able to both influence and understand local regulation affecting GDF’s products and services. notwithstanding a need to address all of the company’s global opportunities. Source: Diana Hunt. notwithstanding that a culture of decisiveness and speed is expected. 11 Exhibit 2 GDF Corp: Position Specification Document The Position The Board seeks an operating executive who will manage this company over the long term (five to seven years). The new CEO will need to work with the company’s customers and be available at all times to address their needs and proactively get “front and center” on many of the company’s major contract bids. this will require only a reinstallation of confidence. in terms of assuring the right technologies are available at the right time. world class in both talent and outlook. the CEO will need to address and manage the extraordinary opportunities that the company has in Asia specifically. The CEO will need to manage a very diverse set of stakeholders. In all matters. when it should partner. the CEO will need to lead and operate the company clearly. As the company’s R&D capability is perhaps second to none. performance issues will need to be addressed and new talent may need to be promoted or recruited. and when it should acquire. reinstill) a fast-paced. but also as a significant emerging market for the company’s products and systems. At the industry level. Lastly. In the context of that strategic review.

the ideal candidate will bring a gravitas to the position that reflects the stature and importance of that position. but where understanding and experience in making the “big bet” is no less relevant. S/he will be experienced in managing all stakeholders. medium and long-term performance expectations that the board of directors has for this company. DH Associates. It bears repeating that the ideal candidate will possess the highest ethical standards and impeccable character—someone with superb judgment and balance in terms of ego and attitude. the competition. This orientation must include the creation of a culture of accountability throughout the organization. Chief Executive Officer The Ideal Candidate The successful CEO will need to bring a special set of commercial and managerial experiences. would be an executive who has successfully managed major technologies serving related industries. revenues and profits. The ideal candidate will bring an obsessive focus to results. and ensure that this ethic is driven deep into the heart of the organization. The ideal candidate must bring a proven talent of getting results through people. S/he will bring a demonstrated global outlook in terms of markets. and the technology are going and coalesce this thinking into a clear set of strategies and action plans that the entire company can commit to. S/he will have a strong view of where the industry is going and have the expertise to position the company to exploit opportunities across the core markets chosen by GDF. The CEO will need to more fully empower the management team and drive decision making down in the organization. Industry Knowledge. the successful candidate will bring a very high intellect to the job and an even stronger commercial orientation and bias to effective action and implementation. The ideal candidate will bring an ability to gain access to (and influence) key customers and industry stakeholders. as well as a skill in delegation and empowerment that people will take responsibility for. but still viable. both short and long term. The CEO must bring a natural ability to inspire and motivate others and to do so through the experiences and intellect s/he brings through both words and deeds. In light of the special situation GDF finds itself in. people and finance. get them to work together in a highly functional way. This orientation will include an objective sense of what businesses to be in. The compensation format will be developed around the short. The ideal candidate will come from the non-service side of the telecommunications industry and bring a record of success in dealing with decisions about technology and customer needs. the ideal candidate will need to bring the following set of competencies to the job (in no specific order): Leadership. and when not to participate at all. The successful candidate will be either a sitting CEO or a major business head who has overseen all functional elements in a full general management role of an organization of significant size in terms of people. Compensation A very attractive package will be offered. In so doing.Selecting a CEO: The Leader. or the Technologist CG-15 p. S/he will have a refined sense of where the industry. the Business Builder. Additionally. when (and with whom) to partner. will be a superb communicator and bring credibility through personal traits and the results already achieved through previous employment. Strong Results Orientation. The ideal candidate will come from a very high performance culture where results and ethical accountability have been achieved together. supply chain. as well as personal characteristics. Source: Diana Hunt. to the position at GDF. The new CEO must bring a strategic mindset to GDF and be able to manifest a set of experiences where strategic decisions have been successfully undertaken. what to divest. Strategic Orientation. . 12 Exhibit 3 GDF Corp: Ideal Candidate Profile. The CEO will need to be able to attract and develop a world-class management team and by his/her example. Less ideal. consistent with the world class characteristics expected from the successful candidate. S/he will be someone that people will want to work with—both internally and externally.

No Manufacturing No Finalist Mike Faber IBM No Software No Not Qualified Karl Abrams Dell No Comp. DH Associates. 13 Exhibit 4 GDF Corp: CEO Candidate List Current Worked at Current From GDF’s Name Status Employer GDF Industry Country Paul Akers GDF Yes Telecom Equip Yes Interested John Jacobs Motorola Yes Telecom Equip No Not Qualified Saul Benno IBM Yes Software No Interested Craig Jensen CompTel No Telecom Equip No Finalist Bill Ainsworth Alcatel No Telecom Equip No Not Qualified Varish Ratnam Research Co. No Telecom Equip No Finalist Frank Almay Lucent No Telecom Equip No Not Interested Marti Rossi Alcatel No Telecom Equip No Not Qualified James Henson Nortel No Telecom Equip No Not Interested Dave Bliss Nokia No Telecom Equip No Not Interested Don Reese Nokia No Telecom Equip No Not Interested Michael Johns Ericsson No Telecom Equip No Interested Nadir Galouche Ericsson No Telecom Equip No Interested Ben Bolster AT&T No Telecom Service Yes Not Qualified Tim Hecker BellSouth No Telecom Service No Not Qualified Deutsche Jens Luden No Telecom Service No Not Qualified Telekom Francisco Dias Vodafone No Telecom Service No Interested Deutsche Jerry Garcia No Telecom Service No Not Qualified Telekom John Granger British Telecom No Telecom Service No Not Qualified James Rodden British Telecom No Telecom Service No Not Qualified Gordon Sprek Telefonica No Telecom Service No Not Qualified Steve Laden General Electric No Industrial No Interested Mike Levy General Electric No Industrial Yes Not Qualified Pradman Koll General Electric No Industrial No Not interested Frank Richardson Contract Co. Hardware No Not Qualified Olivier Jenou Siemens No Industrial No Interested Clay Stapleton Siemens No Industrial No Not Interested Hector Reyes Rolls Royce No Industrial No Interested Henry Rock United Tech. Hardware No Not Qualified Sean Stryker Hewlett Packard No Comp. . the Business Builder. No Industrial No Not Interested Wilton Fulke United Tech. No Industrial No Interested Ara Dunstan Rockwell No Software No Interested Carlton Frays Marconi No Industrial No Not Qualified Jasper Lynn Marconi No Industrial No Interested Source: Diana Hunt.Selecting a CEO: The Leader. or the Technologist CG-15 p.

he led a true cultural renaissance in bringing down the traditional “siloed” culture of the business units. 14 Exhibit 5 Diana Hunt: Analysis and Appraisal of Craig Jensen Craig would bring a wealth of senior executive experience and leadership to the CEO position at GDF. He sets the bar extremely high and operates with an infectious sense of controlled passion. Wherever Craig has worked. . he came into a business that had been overbuilt by predecessors. He will move his family to this country if he is selected for the position. It is these attributes that he brought with him to CompTel and used to form his leadership style. Craig possesses a very high standard of personal conduct. and is a strong team player. Craig has had two employers: GC and CompTel. Craig was born in Europe and moved to the United States when still a teenager. If he has a single weakness.Selecting a CEO: The Leader. we would conclude that there may be no single executive better suited to the task of re-inspiring the employees of GDF. In terms of his credibility. At the same time. it would be that he has a tendency to be overly loyal in some cases. He is a self-described blue-collar executive with a strong work ethic. believing strongly in the philosophy of “trust but verify. they are a part of who he is. He has the energy and personality to re-instill confidence among GDF’s rank and file and make the difficult decisions necessary to ensure long term success. He operates by personal example and will inspire those around him by his spirit and effective sense of energy. He is also very good at getting team buy in and has no tolerance for individual grandstanding. He is a very effective communicator. He is an excellent delegator. but with a minimum of bureaucracy. Leadership. Source: Diana Hunt. He is very bright and absorbs information well and has excellent people skills. Craig acted quickly to reduce costs while closely analyzing and evaluating the strategies of his competitors. or the Technologist CG-15 p. notwithstanding his assertive and compelling personality. Craig possesses tireless energy.” People who work for him are inspired by his energy and pace. He brings a special type of respect and empathy to his work. DH Associates. Industry Knowledge. what he stands for. He views both companies extremely positively because they stand for something and have high ethical leadership. By education. He has experience reinforcing and rationalizing research and development budgets. As a former GC employee. Craig is laser focused on results. being both plain spoken and riveting at the same time. Craig is a natural leader but not what he would call a cheerleader type. inspiration and intelligence. He positions the bar very high and will not accept any behavior that he views as not above the bar. He did this in an overall industry environment where growth was dropping off. As CompTel’s chief operating officer. how he leads. His only recent exposure to telecommunications has not held Craig from doing a superb job of fixing important divisions at CompTel and bringing the company back into highly competitive viability. Craig oversaw the divestiture of non-core businesses. and what directs his passion. His core experience in the industry has come in his most recent years at CompTel. We would recommend Craig highly for the position of CEO at GDF. is very driven. it is immediately obvious that he did not learn the GC values by rote. He is a tough rugby player. as well as his consistency. The experiences gained in the last several years at CompTel compellingly qualify Craig to be the next CEO of GDF. the Business Builder. When Craig joined CompTel. The strategy that emerged from that analysis was an overnight success: CompTel regained several points of market share and margins moved up dramatically. He is known never to ask anyone to do anything that he would not do himself. On the contrary. Craig does not come from the telecommunications industry. He is a strong family man and has stayed close to his birth-country roots. and generates an immediate perception of energy. As a general manager. Craig is a mathematics major and his functional foundation is in audit and operations (which at GC is the catalyst for fast track and general management). behaving ethically at all times. When one meets Craig. Strategic Orientation. and he does understand the long-term commitment that is required. is hands on. both short and long term. he understands the functional interdependencies within a profit and loss statement and has developed a keen understanding of what levers to push to gain results. he has managed for excellent results. Strong Results Orientation.

He is extremely bright and very numerate. and engage with customers. and proving capable of managing during times of bust as well as in times of boom (a very rare quality in an executive). This. Frank has built an exceptional contract manufacturing business. Frank leads as one of the team. his wife will only join him occasionally. 15 Exhibit 6 Diana Hunt: Analysis and Appraisal of Frank Richardson After fourteen years of extraordinary success as the CEO of Contract Builder. Frank is particularly passionate about GDF as they are one of his large customers. His relationship with the GDF board will be extremely important to him. or the Technologist CG-15 p. At Contract Builder. Because of his deep knowledge of GDF and his absolute conviction that he can fix it. where they are successful and where they are failing.Selecting a CEO: The Leader. An issue for Frank will be his full time location. Leadership. Industry Knowledge. He understands the five to seven year commitment requirement. its cost structure. He is extremely focused on customer relations and enjoys the outside contact. He is also absolutely passionate about customers. Frank projects a confidence borne from success. In our interview. Strategic Orientation. He is decisive and has built a culture of accountability throughout the company. He has no fear of well-calculated risk and built a strong rapport with his board of directors. When Frank pitched business to one client. he was told that the deciding factors for why they selected Contract Builder were the ease of communication. business sense and vision. he is extremely interested in pursuing the opportunity. which frequently backed him in his decisions. a spectacular job of leadership and empowerment. almost all of the telecom product makers are his customers and he knows how they think. blended with his knowledge. In an industry that survives on the slimmest of margins. as he is compellingly bright and forceful. Frank took Contract Builder from a $50 million dollar contract manufacturing company to one with revenues of over $10 billion. His long tenure at Contract Builder attests to his ability to commit for the long term. and its position within the industry. how they operate. but stated unequivocally that he is not a technologist and that he would only take the position if he could convince his trusted technology associate to join him. Source: Diana Hunt. . His personality is infectious. he provided a compelling view of what he would do if he were to run GDF. During our interview. manage the technology. Mission critical elements of the telecommunications industry have been put in Frank’s hands. Frank expressed a fairly deep knowledge of GDF. He brings a global perspective to what he does and is a voracious absorber and assimilator of information. bring an orientation to accountability. has made him an executive that people believe in and want to follow. bring back a belief that the company can succeed. especially from private equity firms. although he will rent a place in GDF’s home country. DH Associates. Frank and his team have never taken their eye off the ball. At each turn in the road. moving from 25th in the industry to one of the top five. He is astounded that certain functions are as populated as they are at GDF and would take steps to reduce the redundancies and bureaucracy that he feels have been unaddressed. Strong Results Orientation. how he would attack the cost structure. Frank has decided it is time to step down. Since making his plans for leaving the company public. Frank consistently delivered results at Contract Builder. conceiving of and implementing several big investment bets. He did this through a relentless drive to never lose. collaboration. superb business judgment. the Business Builder. piece by piece. that he has decided not to retire but instead to pursue a new opportunity. he has outmaneuvered his larger competitors. he has been so inundated with offers. as he will seek the degree of freedom he requires to turn the company around. Frank assured us that he will nevertheless make a full commitment to GDF. He delegates well and still knows every aspect of his business operations. He is very articulate and his style of communication is direct and forceful. He and his wife are currently building a home in the United States and. He began breaking down. He does not use the power of his position to inspire others to follow him. and goodwill that they saw among the Contract Builder team.

characterized by “let’s get on with it.. He made up for this. by nature. he has a style of calm and firmly balanced energy. He very much possesses passion for the industry. he responded that it required 1) the ability to see the bend in the road before anyone else and to develop strategies that invest “where the puck will be. Varish has worked on both sides of the Atlantic and is very comfortable operating across cultures. though. to development. He is a very pragmatic individual and possesses a bias toward action in his attitude and his thought process. we view Varish to be an excellent strategist. he has had either direct responsibility or oversight on virtually all the businesses and markets GDF is involved in. Varish does not take credit easily and. Leadership. Varish has been in the telecommunications industry for over 20 years. Rather. and 5) the ability to create a high-performance culture that fosters organizational excellence. Strong Results Orientation. and he knows what industry competitors are doing. the Business Builder. Source: Diana Hunt. engaging at several times on objective self-evaluation around strengths and weaknesses. After making one acquisition at EuroTel. Although he claims to be otherwise. He also took several steps to introduce the EuroTel brand in the U. Varish views himself very much as an operating manager who is highly focused on growth. In his latest job at Research Co. he probably was ten years into his career before he moved from the technology side of business to the commercial side. In fact. He possesses a humble but assertive style. Varish eventually decided to leave the company.” 3) a very strong focus on near-term results. of which he has very high expectations. profits. and has a proven ability to look around the corner and make decisions based on his view of the industry in three years. He is focused and credible. he realized $150 million in savings through cost reductions. Industry Knowledge.S. engineering and the development and management of technology products. product management. He does not over-intellectualize or create unnecessary complexity. His educational and early career roots are in physics. including strategic acquisitions that accelerated growth. Varish is easy to meet and engage with. Through his career. 16 Exhibit 7 Diana Hunt: Analysis and Appraisal of Varish Ratnam Varish Ratnam brings an almost classic background in terms of his credentials for the position of CEO of GDF. Varish has an interesting style of leadership. In our interview. He is ready to commit to a rented residence for himself. He is very skilled at integrating acquisitions and realizing the cost and technology synergies. possessing what he calls an “impatient” style.” Though very much acknowledged as an industry leader. Varish has reservations about moving his family to GDF’s home country as he has a young child with learning disabilities. costs and investments. or the Technologist CG-15 p. however. he is not high profile in behavior. and public company CEO. His experience covers the gamut from advanced research. He is well respected by customers for his knowledge and his ethics.” When asked recently by his board to describe the role of a CEO. DH Associates. . He understands industry trends. He is familiar with Asia as a sourcing and supply area. He brings a professional level of enthusiasm to the way he communicates.Selecting a CEO: The Leader. For that reason. He is extremely credible and encourages debate within his management team. does not start many comments with “I. he very successfully took advanced technology concepts from the internal R&D department and integrated them with acquired technologies to create new and advanced products. He built the EuroTel broadband business globally from a standing start to over $1 billion.. He is neither low-key nor high-key. 4) the ability to create a team environment. in his meteoric rise at EuroTel. Varish rose to the president and COO position at EuroTel and believes he would have become CEO were he a citizen of EuroTel’s home country. business unit management. He is apolitical and non-bureaucratic. technology deployment. Varish was extremely forthright and introspective.” 2) high credibility with customers and investors as “they are the ones buying your future growth story. where it is going. He has generated very favorable operating results through his career both at EuroTel and at Research Co. Strategic Orientation.

000 with a bonus target of 150 percent. In fact. He has a target bonus of 100 percent of salary. he stated that he would probably want to buy a large amount of GDF shares at the earliest opportunity.2 million. He is already a man of significant net worth. He still has several options in the money based on his staying with Contract Builder as chairman of the board. Varish earns a base salary of $825.000 for himself. thus we do not see any significant issues arising. 17 Exhibit 8 Diana Hunt: Present Terms of Compensation for Three Finalists Craig Jensen At CompTel. he was granted $2. His annual bonus target was 125 percent of base (maximum 250 percent). He also received a long-term incentive that was 2 times salary (maximum 4 times).000. He views that the board will be amenable to an acceleration of these options that total $35 million.000 into the bonus pool for his executive team and took out only $100. or the Technologist CG-15 p. he received restricted shares aggregating to $15. Varish was sufficiently uncomfortable with this that he put his 2003 bonus of $700.000.. Frank Richardson At Contract Builder.Selecting a CEO: The Leader. Frank earned a base of $992. Given public exposure of this information. For 2003.000. When he joined CompTel.5 million and earned a guaranteed 7 percent per year. DH Associates.2 million plus a $1 million sign on bonus to “make good” on the bonuses he was leaving on the table at GC. For 2003. He also received a separate pension account that commenced at $2. he was to receive a payment of $3. When he signed on with the company. . Craig had an annual salary of $925.200. he was to receive a bonus of $1. Source: Diana Hunt. He received between $4 million and $6 million in stock options every year. the Business Builder.5 million in stock options and $4 million in restricted shares (one-quarter of which are vested). He also received restricted stock units of between $3 million and $5 million every three years.5 times what his executive management team is earnings. Varish currently earns 2. Varish Ratnam At Research Co.

DH Associates.8 2002 Actual . the Business Builder.0 value Severance / Change Control 3x salary 3x salary.0 2002 Actual . $1.8 / yr $34. or the Technologist CG-15 p.5 Annual Cash Bonus Target 170% 150% 140% Maximum 300% 300% 270% 2003 Actual $3.5 Sign on Bonus Cash $0. 3x bonus. - Pension $14. options vest options vest options vest Plane.6 $4.6 $3. 3x bonus.0 2002 Actual $3.0 $8.2 $1.2 Annual Stock Options 2003 Actual $5.5 Restricted Stock 2003 Actual .1 $21.3 $14.9 2002 Actual . . .1 Long-Term Cash / Stock Target 250% 300% 250% Maximum 500% 500% 500% 2003 Actual $2. .1 $9. 1.0 Restricted Stock $8.4 $7.0 $1.0 $3. 3x bonus. Personal Use Yes Yes Yes Financial Planning $15K $15K $15K Source: Diana Hunt.Selecting a CEO: The Leader.6 Stock Options $18.3 $3.0 value $0.6 $8. 3x salary. $3.2 $4.5 $3.5 $0 $0.6 $24.8 2. 18 Exhibit 9 Benchmark Compensation: Three Global Telecommunications Companies ($ in millions) Competitor #1 Competitor #2 Competitor #3 Base Salary $1.