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

Hunt interviewed an exhaustive set of professional contacts that she has built up over the years. which could amount to $4 million. in particular. Hunt agreed to perform the GDF search on her company’s standard terms: a fixed fee of $1. He had experience working with Hunt on a previous search and was pleased with the quality of candidates she brought him and. Guzman felt that the fee was fair. or the Technologist CG-15 p. telecommunication service operators. as other search consultants charged one-third of first-year expected cash payments (salary plus target bonus). and with strong general management experience. performer or leader.) 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. Based on these inquiries. to identify specific individuals to be included in the search. If an individual had been an effective thinker. 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. if possible. Hunt used this information to draft a “position specification document” that outlined a description of the company. 3 Guzman recommended that the committee retain Diana Hunt of DH Associates to manage the search process. (See Exhibit 2 for the position specification document and Exhibit 3 for the profile of the ideal candidate. Hunt looked for individuals with related industry experience. and the professional and personal qualifications expected in the ideal candidate. As a first step.Selecting a CEO: The Leader. 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 . Three of these individuals were nationals of GDF’s home country (see Exhibit 4 for the candidate list). The philosophy of DH Associates. For the GDF search. It included one current GDF executive. Hunt developed a list of candidates. the Business Builder. based on its years of experience. the responsibilities of the CEO position. was that a person’s past performance was the most reliable indicator of what that individual was likely to achieve in the future. including GDF’s competitors. She shared this document with qualified individuals after discussing the opportunity with them in detail. 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. Hunt contacted each individual to discuss the opportunity and gauge their interest. After her initial conversations. as well as executives from telecommunication equipment providers. individuals who were nationals of GDF’s home country should be given added consideration. that individual would likely bring those same qualities to its subsequent employment. Hunt engaged in one-on-one discussions with several key executives at GDF. She also looked for those with general management expertise. two former GDF executives. corporate customers. Prospects came both from within the company and externally. Hunt was looking for an individual who had a history of successfully managing technology and complex organizations. as well as each member of the board.5 million plus expenses. and supplier organizations. In compiling the target list. with the quality of the individual his company ultimately hired. The board of directors urged that. seven candidates declined to continue. After finalizing the list.

and unacceptably low market share. 4 superior to those of GDF. As a result. he set a new strategy. or a realignment of organizational work processes. improve volume. and for some period of time. did not meet the qualifications of the ideal candidate. he played on the rugby team and was granted a partial athletic scholarship. a reduction of the cost structure. As a first step. he was asked to make recommendations on how to improve these businesses. For example. Jensen was able to increase inventory turns. He learned quickly that problems existed throughout the operation: financial discipline was weak. The division ultimately grew market share and profitability. she had narrowed the list down to 14 viable candidates. slowing revenue growth. joining as a corporate auditor. and then execute with success. Jensen showed an ability to isolate the problem. earning a bachelor’s degree in mathematics. He remained at GC Capital for the next 15 years. He was also asked to turn around struggling operations. The corporate auditor function at GC was quite prestigious. the new team had a mindset that it could succeed. At each stage of the game. relocating to Asia. as corporate auditor.Selecting a CEO: The Leader. standing head-and- shoulders above the rest. the Business Builder. He also removed over 1. in that Jensen and his team were required to perform financial and strategic reviews of many of the top businesses within the company. After graduation. a shift in business focus to improve revenues and market share. Craig Jensen Craig Jensen was born in Europe but moved with his family to the United States in 1970. He was asked to improve the profitability of asset portfolios. He attended the University of Michigan from 1971 to 1975. he was asked to turn around GC Capital’s truck leasing operation in Europe. While in college. despite a tough industry environment. The situation was one that Jensen had been asked to fix before: operating margins below industry average. He also removed approximately 700 low-performing employees and replaced them with 500 high-performing employees. Others who declined did so for personal reasons or from a feeling that GDF would not make a good fit for them. Jensen left GC Capital and took a senior position in one of GC’s businesses. or the Technologist CG-15 p. for some reason or another. implement a plan or strategy. Hunt eliminated an additional 15 that she felt. and added a rigorous but streamlined set of financial controls. The success earned him . GC Capital. Among these were three whom she recommended to the search committee as the most qualified finalists. His assignments were both in the United States and in Europe. In 1996. Jensen took his first job with GC. decrease unit prices. Importantly. and during this time period was given a wide range of responsibilities. whether it was through a revamp of the supply chain. Within six months.000 low-producing employees from the organization and replaced 90 percent of top management. he and his family had to relocate to Europe. and reduce the business’s cost base. Through these reviews. in 1992. the operation’s balance sheet was highly leveraged. Jensen was very successful in this position and two years later moved to one of GC’s fastest- growing subsidiaries. reduced the cost structure. Having reduced the list to 29 potential candidates. Jensen came to know the intimate details of many of GC’s inner workings. he oversaw a comprehensive review of the strategy and management personnel. Furthermore. Over the next two years. and morale and productivity were low.

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

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

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

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

where they would meet with each one individually in two-hour sessions. when approached by Hunt about the GDF position. strong accountability.Selecting a CEO: The Leader. Having read in detail Hunt’s reports on their backgrounds and achievements. THE CEO SELECTION The GDF CEO search committee arranged to meet the three candidates on March 15. because it was a company he knew quite well: GDF was an important customer of his both at EuroTel and Research Co. the Business Builder. Ratnam was employed at Research Co. Assume that you are on the board of GDF. Ratnam was very respectful of GDF’s research and development and its products. 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 arranged for all three executives to fly to GDF’s headquarters. Guzman. 2. along with their recommendation for who should be selected. He had a strong interest in joining GDF. 4. Lindsay. 3. He believed firmly that the company could recover from its current difficulties and that it could reestablish a leading position in the industry. or the Technologist CG-15 p. and Cathcart were impressed with all three of the candidates. 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). 2004 to make their final selection. 9 making several changes in structure and work process. 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). They planned to take a summary of the candidates to the full board of directors. Which candidate would you select for CEO? Provide a rigorous justification of your choice. QUESTIONS 1. Discuss the positive and negative aspects of the process used by Diana Hunt to develop the candidate list in Exhibit 4. . he was able to engender a culture of collegiality. Once approved by the full board. Gelt. Develop a compensation package that will attract your final choice for CEO and provide the correct executive incentives from the perspective of shareholders. 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. By the end of the day. and high expectation of what the company could achieve. Be prepared to defend all elements of your compensation package.

10 Exhibit 1 GDF Corp: Historical Financial Information (1997 – 2003) ($ in millions) 1997 1998 1999 2000 2001 2002 2003 Revenues 2.800 1.500 600 1.800 Operating Profit 240 338 504 596 -336 -90 360 Operating Margin 12. dollar equivalent. the Business Builder.100 1.200 2. .600 4.S.Selecting a CEO: The Leader.000 2.0% 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.700 1.800 1. Operating profit and net income excludes certain charges for impairment of intangible assets.800 3.0% 12. or the Technologist CG-15 p.0% 2. Source: Company annual reports.0% -5.0% 14.2% -12.000 4.5% 14.700 3.

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

S/he will bring a demonstrated global outlook in terms of markets. revenues and profits. The ideal candidate will come from a very high performance culture where results and ethical accountability have been achieved together. as well as a skill in delegation and empowerment that people will take responsibility for. medium and long-term performance expectations that the board of directors has for this company. and ensure that this ethic is driven deep into the heart of the organization. both short and long term. to the position at GDF. when (and with whom) to partner. get them to work together in a highly functional way. Strong Results Orientation. Strategic Orientation.Selecting a CEO: The Leader. 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 ideal candidate will bring an ability to gain access to (and influence) key customers and industry stakeholders. but still viable. the Business Builder. The ideal candidate will bring an obsessive focus to results. The compensation format will be developed around the short. what to divest. supply chain. DH Associates. This orientation must include the creation of a culture of accountability throughout the organization. S/he will be someone that people will want to work with—both internally and externally. 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. consistent with the world class characteristics expected from the successful candidate. Industry Knowledge. This orientation will include an objective sense of what businesses to be in. In light of the special situation GDF finds itself in. 12 Exhibit 3 GDF Corp: Ideal Candidate Profile. 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. but where understanding and experience in making the “big bet” is no less relevant. people and finance. 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. In so doing. Chief Executive Officer The Ideal Candidate The successful CEO will need to bring a special set of commercial and managerial experiences. 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. Additionally. 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. or the Technologist CG-15 p. the ideal candidate will bring a gravitas to the position that reflects the stature and importance of that position. and when not to participate at all. as well as personal characteristics. Less ideal. The CEO will need to be able to attract and develop a world-class management team and by his/her example. would be an executive who has successfully managed major technologies serving related industries. will be a superb communicator and bring credibility through personal traits and the results already achieved through previous employment. the competition. The CEO will need to more fully empower the management team and drive decision making down in the organization. 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. S/he will be experienced in managing all stakeholders. Source: Diana Hunt. . The ideal candidate must bring a proven talent of getting results through people. Compensation A very attractive package will be offered. the ideal candidate will need to bring the following set of competencies to the job (in no specific order): Leadership. S/he will have a refined sense of where the industry. 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.

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. 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. No Manufacturing No Finalist Mike Faber IBM No Software No Not Qualified Karl Abrams Dell No Comp. 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. the Business Builder. . DH Associates. No Industrial No Not Interested Wilton Fulke United Tech. 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. or the Technologist CG-15 p. Hardware No Not Qualified Sean Stryker Hewlett Packard No Comp.

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

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

He is extremely credible and encourages debate within his management team. the Business Builder. and 5) the ability to create a high-performance culture that fosters organizational excellence. Varish eventually decided to leave the company. of which he has very high expectations. In our interview. Although he claims to be otherwise. where it is going. He brings a professional level of enthusiasm to the way he communicates.. After making one acquisition at EuroTel. Varish does not take credit easily and. He possesses a humble but assertive style. he has a style of calm and firmly balanced energy. including strategic acquisitions that accelerated growth. Strong Results Orientation. Leadership. he probably was ten years into his career before he moved from the technology side of business to the commercial side.S. He understands industry trends. Industry Knowledge. His educational and early career roots are in physics. characterized by “let’s get on with it. Varish has been in the telecommunications industry for over 20 years. He also took several steps to introduce the EuroTel brand in the U. In fact. and has a proven ability to look around the corner and make decisions based on his view of the industry in three years. For that reason. and public company CEO. 4) the ability to create a team environment. however. he has had either direct responsibility or oversight on virtually all the businesses and markets GDF is involved in. engineering and the development and management of technology products. He is very skilled at integrating acquisitions and realizing the cost and technology synergies.” 3) a very strong focus on near-term results. . does not start many comments with “I. He is ready to commit to a rented residence for himself. Rather. Varish was extremely forthright and introspective.Selecting a CEO: The Leader. He is focused and credible. Varish is easy to meet and engage with. or the Technologist CG-15 p. He is a very pragmatic individual and possesses a bias toward action in his attitude and his thought process. Source: Diana Hunt. though. He is apolitical and non-bureaucratic. Varish has an interesting style of leadership. technology deployment. Strategic Orientation. business unit management. In his latest job at Research Co. He made up for this. He very much possesses passion for the industry. he is not high profile in behavior. 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. he realized $150 million in savings through cost reductions. engaging at several times on objective self-evaluation around strengths and weaknesses. we view Varish to be an excellent strategist. He does not over-intellectualize or create unnecessary complexity. DH Associates. profits. Varish has reservations about moving his family to GDF’s home country as he has a young child with learning disabilities. He is well respected by customers for his knowledge and his ethics. by nature. He is neither low-key nor high-key. His experience covers the gamut from advanced research. in his meteoric rise at EuroTel. He is familiar with Asia as a sourcing and supply area. and he knows what industry competitors are doing.” 2) high credibility with customers and investors as “they are the ones buying your future growth story.” Though very much acknowledged as an industry leader. 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. Through his career.” When asked recently by his board to describe the role of a CEO. to development. Varish views himself very much as an operating manager who is highly focused on growth. 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. He has generated very favorable operating results through his career both at EuroTel and at Research Co. costs and investments. product management.. Varish has worked on both sides of the Atlantic and is very comfortable operating across cultures. possessing what he calls an “impatient” style. 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 also received a long-term incentive that was 2 times salary (maximum 4 times). His annual bonus target was 125 percent of base (maximum 250 percent). He also received a separate pension account that commenced at $2. Frank Richardson At Contract Builder. He is already a man of significant net worth. He views that the board will be amenable to an acceleration of these options that total $35 million.2 million. Varish was sufficiently uncomfortable with this that he put his 2003 bonus of $700. In fact.5 million and earned a guaranteed 7 percent per year.000. For 2003. Frank earned a base of $992.000. he stated that he would probably want to buy a large amount of GDF shares at the earliest opportunity. When he joined CompTel. or the Technologist CG-15 p.000. Source: Diana Hunt. He also received restricted stock units of between $3 million and $5 million every three years. Craig had an annual salary of $925.200.5 times what his executive management team is earnings. When he signed on with the company. Varish currently earns 2. He received between $4 million and $6 million in stock options every year. Given public exposure of this information.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 received restricted shares aggregating to $15. he was to receive a payment of $3. Varish Ratnam At Research Co. Varish earns a base salary of $825. he was granted $2. He has a target bonus of 100 percent of salary. He still has several options in the money based on his staying with Contract Builder as chairman of the board. he was to receive a bonus of $1..000 into the bonus pool for his executive team and took out only $100.Selecting a CEO: The Leader.2 million plus a $1 million sign on bonus to “make good” on the bonuses he was leaving on the table at GC.000 with a bonus target of 150 percent. For 2003. DH Associates. . the Business Builder.5 million in stock options and $4 million in restricted shares (one-quarter of which are vested).

1 $21. 3x bonus. Personal Use Yes Yes Yes Financial Planning $15K $15K $15K Source: Diana Hunt.8 2.8 / yr $34.2 Annual Stock Options 2003 Actual $5. options vest options vest options vest Plane. .0 value $0.0 $1.6 $8.5 Annual Cash Bonus Target 170% 150% 140% Maximum 300% 300% 270% 2003 Actual $3. - Pension $14. 1.6 Stock Options $18.4 $7.1 Long-Term Cash / Stock Target 250% 300% 250% Maximum 500% 500% 500% 2003 Actual $2. 3x salary.2 $1.6 $24.0 $8. 3x bonus.0 value Severance / Change Control 3x salary 3x salary. . . the Business Builder.9 2002 Actual .6 $3.1 $9.5 Sign on Bonus Cash $0.3 $3.8 2002 Actual .3 $14.0 $3.Selecting a CEO: The Leader.6 $4.5 Restricted Stock 2003 Actual .0 Restricted Stock $8.0 2002 Actual $3.5 $0 $0. 18 Exhibit 9 Benchmark Compensation: Three Global Telecommunications Companies ($ in millions) Competitor #1 Competitor #2 Competitor #3 Base Salary $1. $1. 3x bonus.2 $4.0 2002 Actual .5 $3. or the Technologist CG-15 p. DH Associates. $3.