Kindler kindles change at Pfizer

Pfizer’s new CEO, Jeff Kindler announces a strategic plan which involves the slimming of the workforce by around ten thousand employees over the next two years. Its aim is to reposition the company in the long term for improved performance and shareholder returns. The unexpected timing of the departure of former CEO Hank McKinnell recently prepared the way for significant changes at the company. The honeymoon period for a new leader may work in the company’s favour

When a corporate leader departs unexpectedly, we can expect two things. That the company has reacted to some external events, and that the move will be followed by a major change intiiative. Both seem to be the case at Pfizer.

The BBC noted

The shake-up comes as the world’s biggest drugs firm faces rising competition from generic drugmakers.. Pfizer said it planned to close three research sites and two factories in the US, as well as a factory in Germany and research sites in Japan and France.

Pfizer’s news release this week announced that

‘the company’s immediate priorities were to drive improved performance, position Pfizer for future success and enhance total shareholder return. Executing on those priorities will mark the beginning of an ongoing process to change the

The restructuring follows the company’s leadership changes in which Hank McKinnell was replaced last year as CEO by corporate lawyer Jeff Kindler.

McKinnell’ departure was attributed to the disappointing performance of the company over several years, and possibly to his leadership style, and reluctance to yield to shareholder concerns over his remuneration. The leader of the world’s largest pharmaceuticals group was attracting the increasing attention of web-based protest groups.

What’s a leader worth?

We examined the issue of Mr McKinnel’s remuneration in an earlier Blog. This is probably an unwelcome side issue for the company, although it would have contributed to the considerations leading to the appointing a new leader.

A leadership principle

There is a leadership principle emerging here. We commented on it in the earlier case as the temporary leadership honeymoon granted to a new leader during which change programmes are more easily initiated.

I would like to offer a more speculative possibility. The honeymoon effect may be more powerful when a charismatic leader is involved. I am reminded of examples in political and sporting fields. This idea is open to testing by a careful examination of the consequences of leadership changes in the short and longer term. As far as I am aware this has not been tested for business readers, but I would welcome suggestions and comments.

If this is the case, it should be noted that the company has appointed someone with a safe pair of hands, rather than a more dangerously charismatic personality.

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Pfizer yanks Hank

Drug giant Pfizer reports that departing CEO Hank McKinnell will receive nearly $200 million compensation on his departure next February. Mr McKinnell is one of the increasingly rare breed of leader, a ‘lifer’, who has spent his business career working his way to the top of a major corporation. As the company faces major problems to retain its market leadership we explore the issues of valuing a corporate leader.

[The original post of December 21st 2006 was modified January 23rd 2007].
As a fellow lifer albeit in a different sector, I wish him well. Lifers have some empathy, even when incarcerated in different prisons, and bound with different kinds of handcuff.

Hank and I have served a total of several life sentences. In some ways mine in a more open prison to the end, although the longer I stayed, the greater reluctance I felt towards making a break for freedom.

The Handcuffs we deserve?

I estimate that Hank’s claim to compensation is around a thousand times greater than my own. It has become a question of our leaders: Do they deserve the rewards they get? Discussion suggests a range of views on this, ranging from never, to sometimes, to only for a few leaders who really made a difference. And that’s the rub. More often than not it’s difficult to arrive at a clear economic view.

For example, a leader’s contributions may be within a system which has only loose connections between real world impact, and financial rewards. For example, I don’t know how much the Pope influences people around the World, or how much is his remuneration.

What do you think?

From my academic resting place, I can argue (not particularly convincingly) that I have taught at least one person who went on to become a major political figure, and a clutch of business students who later became successful national and more rarely international leaders. I have served on boards with a few others from the ranks of the good and the great. Maybe, just maybe, my assorted writings or forays into business consultancy have influenced a company here and there.

What do you think? Should our thought leaders expect remuneration close to that of business leaders? Are our business acedemics in need of a leader to secure their rightful returns for their dedication to a lifetime of work? If you reply never or without a doubt, do you have a convincing argument – or are you just sharing your belief system about the leaders we deserve?

Afterthoughts

The thrust of this, one of the first posts to this Blog, was the currently fashionable issue of director remuneration. It lies at the heart of the debate on leaders. Can the rewards earned by strategic leaders be justified through their rewards? According to leadership texts, the answer is ‘sometimes’, although it turns out to be difficult to disentangle the impact of a leader from the consequences of wider economic variations (the rising tide, or falling tide effect).

For Pfizer, the issue could have been stated more clearly as follows. Hank McKinnell had presided over a rise in corporate furtunes, and then a decline. It appears that under pressure from major shareholders, his leadership style was confrontational, and his belief that he was worth a handsome final remuneration package may also have contributed to the pressures for change. Interestingly, the company has opted for a Lawyer to replace him, perhaps a signal of one major dimension that the new leader will have to confront.

As The Wall Street Journal put it :

Pfizer Inc. directors named Jeffrey B. Kindler, the company’s general counsel and a former McDonald’s Corp. executive, as chief executive, succeeding Henry “Hank” McKinnell at the helm of the world’s largest pharmaceutical company