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

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

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

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

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

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

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

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

0% 12.800 1.000 4. the Business Builder.600 4.000 2.800 3.800 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. Source: Company annual reports.S.0% 14.100 1.5% 14.800 Operating Profit 240 338 504 596 -336 -90 360 Operating Margin 12.0% 2.200 2. 10 Exhibit 1 GDF Corp: Historical Financial Information (1997 – 2003) ($ in millions) 1997 1998 1999 2000 2001 2002 2003 Revenues 2.500 600 1. Operating profit and net income excludes certain charges for impairment of intangible assets. or the Technologist CG-15 p.0% Net Income (Loss) 100 140 220 280 -520 -200 10 Debt 260 340 360 240 850 820 840 Equity 1.0% -5.Selecting a CEO: The Leader.700 1. .800 1.700 3.2% -12. dollar equivalent.

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

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

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

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

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

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

Varish Ratnam At Research Co.000. He also received restricted stock units of between $3 million and $5 million every three years. 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.2 million. His annual bonus target was 125 percent of base (maximum 250 percent). he was to receive a payment of $3. Varish currently earns 2. thus we do not see any significant issues arising.000 into the bonus pool for his executive team and took out only $100.. Frank earned a base of $992.000 with a bonus target of 150 percent.000 for himself.200. he received restricted shares aggregating to $15. Craig had an annual salary of $925. For 2003.5 times what his executive management team is earnings.Selecting a CEO: The Leader. For 2003. Frank Richardson At Contract Builder. he was to receive a bonus of $1. . Given public exposure of this information. he stated that he would probably want to buy a large amount of GDF shares at the earliest opportunity.000. He also received a separate pension account that commenced at $2. He views that the board will be amenable to an acceleration of these options that total $35 million. Varish earns a base salary of $825. When he joined CompTel.5 million and earned a guaranteed 7 percent per year. the Business Builder. He also received a long-term incentive that was 2 times salary (maximum 4 times). Source: Diana Hunt.000. Varish was sufficiently uncomfortable with this that he put his 2003 bonus of $700.5 million in stock options and $4 million in restricted shares (one-quarter of which are vested). When he signed on with the company. he was granted $2. He has a target bonus of 100 percent of salary. In fact. 17 Exhibit 8 Diana Hunt: Present Terms of Compensation for Three Finalists Craig Jensen At CompTel. DH Associates. or the Technologist CG-15 p. He received between $4 million and $6 million in stock options every year.2 million plus a $1 million sign on bonus to “make good” on the bonuses he was leaving on the table at GC.

6 $8.6 $3.Selecting a CEO: The Leader. . $3.6 Stock Options $18. 3x bonus. 3x bonus. Personal Use Yes Yes Yes Financial Planning $15K $15K $15K Source: Diana Hunt. 1.0 Restricted Stock $8.6 $24.0 2002 Actual . $1.2 Annual Stock Options 2003 Actual $5.1 Long-Term Cash / Stock Target 250% 300% 250% Maximum 500% 500% 500% 2003 Actual $2. DH Associates.0 value Severance / Change Control 3x salary 3x salary.5 Restricted Stock 2003 Actual . the Business Builder.0 value $0.0 2002 Actual $3.5 Annual Cash Bonus Target 170% 150% 140% Maximum 300% 300% 270% 2003 Actual $3. 3x bonus.8 2.3 $3.0 $8.2 $4. or the Technologist CG-15 p.9 2002 Actual . .1 $21.5 Sign on Bonus Cash $0. 18 Exhibit 9 Benchmark Compensation: Three Global Telecommunications Companies ($ in millions) Competitor #1 Competitor #2 Competitor #3 Base Salary $1. options vest options vest options vest Plane.8 2002 Actual .8 / yr $34. - Pension $14.0 $3.1 $9.6 $4.5 $0 $0. 3x salary.2 $1. .3 $14.4 $7.0 $1.5 $3.