Which brings us to today’s news story that shows what happens when the CEO’s successor is announced: Alex Gorsky, the former chairman for medical devices Johnson & Johnson (JNJ), was named as outgoing CEO William Weldon’s successor in late February of this year (article here). This morning, less than two months after the succession plan was announced, JNJ felt its first reaction to the decision:
Sheri McCoy, who has been with J&J for 30 years, including a position as worldwide chairman of the Pharmaceuticals division for the past three years, announced her resignation; for those who don’t know, it was common knowledge that Mr. Gorsky and Mrs. McCoy were the two contenders for the top spot at Johnson & Johnson after both were named company vice chairman in January 2011. As a result of her resignation, Mrs. McCoy has joined Avon, the leading global beauty company ($11B in sales), and will become CEO effective April 23rd. Mrs. McCoy had this to say:
"I am extremely honored and excited to join Avon--a great company with an iconic brand and so much clear potential. Avon has an unparalleled global direct selling sales force of over six million Representatives and an enviable geographic footprint. I look forward to working with the team to develop and execute a roadmap to achieve the next phase of growth for the company."
Announcing a successor for the world to know WITHOUT ANY IDEA OF THE CURRENT CEO’S DEPARTURE DATE is an overreaching task that isn’t pursued by a single company that I can think of; the likely reason is that it all but invites a rash of insider disappointment (lots of people want to be the top dog) that results in departures, generally in a similar industry to a close competitor. In my mind, Berkshire would do best to stick with their current plan and wait to make an announcement until such a decision is required.
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I hope to own a collection of great businesses; to ever sell one, I would demand a substantial premium to the average market valuation due to what I believe are the understated benefits to the long term investor of superior fundamentals and time on intrinsic value. I don't have a target when I purchase a stock; my goal is to replicate the underlying returns of the business in question - which if I've done my job properly, should be very attractive over many years.