In the Harvard Business Review, the former CEO of Blockbuster wrote the following article on his experiences facing off against the legendary Icahn:
How I Did It: Blockbuster’s Former CEO on Sparring with an Activist Shareholder
When my assistant came into my office in early 2005 and told me that Carl Icahn was on the phone, it was a complete surprise. I knew, of course, that Icahn was an “activist shareholder,” but I had no idea why he might be calling. Icahn told me he’d bought nearly 10 million shares of Blockbuster, where I’d served as CEO for eight years. I didn’t know what kind of play he saw in Blockbuster — and I certainly didn’t expect the new challenges his being our biggest shareholder would bring over the next couple of years.
Long before Carl Icahn arrived on the scene, Blockbuster faced its share of challenges. Indeed, expectations of failure were hovering over the company even before I joined in 1997. Most outsiders were convinced that our bricks-and-mortar video retail business would be killed off by market shifts and technological advances. But I firmly believed we could keep the Blockbuster brand relevant, no matter how people decided to watch movies. Even though Blockbuster nearly doubled revenues to more than $6 billion from the time I joined the company, plenty of people were betting against us.
The atmosphere became even more difficult when a group of dissident directors were put into the board mix. CEOs need to be devising strategy, working with board members, energizing organizations, and dealing with shareholders, but most leaders are ill-prepared to handle an activist shareholder who comes at the company with a proxy fight and wins seats on the board. This became readily apparent in 2005. When directors with preconceived notions are determined to serve as obstacles to management’s plans, it’s hard to find a formula for success. Three years after my departure as CEO, Blockbuster declared bankruptcy.
A Career Built on Turnarounds
In a way, it’s ironic that Blockbuster is being featured in a special issue on failure, because I spent most of my career capitalizing on failure by fixing troubled businesses.
After graduating from New York Institute of Technology in 1970, I worked at 7-Eleven. Trainees like me restaffed and restocked failing stores and tried to keep them in business. I was assigned to Long Island—an area where the company had made mistakes in choosing both locations and operators. By the time I was 25, I was a district manager, running 35 stores in Suffolk County. Over time, we transformed the market into one of the company’s most profitable. As a result I was promoted—first to northeast division manager, then to national marketing manager, and finally to senior vice president with worldwide responsibilities. In all, I spent 20 years at 7-Eleven. It was a rapidly expanding business with a lot of growing pains, which created many opportunities.
After leaving 7-Eleven, I spent a very short time as COO for Pearle Vision; then I became CEO of Circle K, a convenience store chain that was in bankruptcy. We took the company private, improved the business, and three years later sold it to Tosco, an oil company, earning our investors a more than quadrupled return on their money.
Next PepsiCo (PEP) hired me as CEO of its struggling Taco Bell chain. There I learned an important lesson: Just because you’re hired to lead a turnaround doesn’t mean you have to throw out the existing strategy. On my fourth day at Taco Bell, its senior managers presented their business plan. Their analysis made sense. I saw no need to change it simply in order to put my fingerprints on it.
Click here for entire article:
http://hbr.org/2011/04/how-i-did-it-blockbusters-former-ceo-on-sparring-with-an-activist-shareholder/ar/1#
After reading the article, Icahn was apparently moved to respond:
Why Blockbuster Failed
by Carl Icahn
I liked John Antioco personally. He’s not a bad guy. He was a capable executive, but I wasn’t impressed with his work ethic—his heart didn’t seem in it. When I launched the proxy fight at Blockbuster, the feeling that he’d botched the Hollywood Video deal was widespread. The biggest issue was his excessive compensation package. Investors were outraged that he’d get $50 million if there was a change of control. That was the nail in his coffin. I’ve been involved in many proxy fights, but Blockbuster was easy. We won the vote by a huge margin. Antioco was really unpopular among shareholders.
I want to clarify a few things here. It’s not true that I controlled Blockbuster’s board. The two directors I brought in were independent, experts in the media industry, and not “my guys”— they sometimes voted against my position. I’m also not so domineering in the boardroom. During the dispute over Antioco’s 2006 bonus, for instance, I was strongly against giving him the money, but even his friends on the board were irate about it. His departure wasn’t just my wish — the board was not unhappy when he left.
Click here for the entire article: http://hbr.org/2011/04/how-i-did-it-blockbusters-former-ceo-on-sparring-with-an-activist-shareholder/sb1
How I Did It: Blockbuster’s Former CEO on Sparring with an Activist Shareholder
When my assistant came into my office in early 2005 and told me that Carl Icahn was on the phone, it was a complete surprise. I knew, of course, that Icahn was an “activist shareholder,” but I had no idea why he might be calling. Icahn told me he’d bought nearly 10 million shares of Blockbuster, where I’d served as CEO for eight years. I didn’t know what kind of play he saw in Blockbuster — and I certainly didn’t expect the new challenges his being our biggest shareholder would bring over the next couple of years.
Long before Carl Icahn arrived on the scene, Blockbuster faced its share of challenges. Indeed, expectations of failure were hovering over the company even before I joined in 1997. Most outsiders were convinced that our bricks-and-mortar video retail business would be killed off by market shifts and technological advances. But I firmly believed we could keep the Blockbuster brand relevant, no matter how people decided to watch movies. Even though Blockbuster nearly doubled revenues to more than $6 billion from the time I joined the company, plenty of people were betting against us.
The atmosphere became even more difficult when a group of dissident directors were put into the board mix. CEOs need to be devising strategy, working with board members, energizing organizations, and dealing with shareholders, but most leaders are ill-prepared to handle an activist shareholder who comes at the company with a proxy fight and wins seats on the board. This became readily apparent in 2005. When directors with preconceived notions are determined to serve as obstacles to management’s plans, it’s hard to find a formula for success. Three years after my departure as CEO, Blockbuster declared bankruptcy.
A Career Built on Turnarounds
In a way, it’s ironic that Blockbuster is being featured in a special issue on failure, because I spent most of my career capitalizing on failure by fixing troubled businesses.
After graduating from New York Institute of Technology in 1970, I worked at 7-Eleven. Trainees like me restaffed and restocked failing stores and tried to keep them in business. I was assigned to Long Island—an area where the company had made mistakes in choosing both locations and operators. By the time I was 25, I was a district manager, running 35 stores in Suffolk County. Over time, we transformed the market into one of the company’s most profitable. As a result I was promoted—first to northeast division manager, then to national marketing manager, and finally to senior vice president with worldwide responsibilities. In all, I spent 20 years at 7-Eleven. It was a rapidly expanding business with a lot of growing pains, which created many opportunities.
After leaving 7-Eleven, I spent a very short time as COO for Pearle Vision; then I became CEO of Circle K, a convenience store chain that was in bankruptcy. We took the company private, improved the business, and three years later sold it to Tosco, an oil company, earning our investors a more than quadrupled return on their money.
Next PepsiCo (PEP) hired me as CEO of its struggling Taco Bell chain. There I learned an important lesson: Just because you’re hired to lead a turnaround doesn’t mean you have to throw out the existing strategy. On my fourth day at Taco Bell, its senior managers presented their business plan. Their analysis made sense. I saw no need to change it simply in order to put my fingerprints on it.
Click here for entire article:
http://hbr.org/2011/04/how-i-did-it-blockbusters-former-ceo-on-sparring-with-an-activist-shareholder/ar/1#
After reading the article, Icahn was apparently moved to respond:
Why Blockbuster Failed
by Carl Icahn
I liked John Antioco personally. He’s not a bad guy. He was a capable executive, but I wasn’t impressed with his work ethic—his heart didn’t seem in it. When I launched the proxy fight at Blockbuster, the feeling that he’d botched the Hollywood Video deal was widespread. The biggest issue was his excessive compensation package. Investors were outraged that he’d get $50 million if there was a change of control. That was the nail in his coffin. I’ve been involved in many proxy fights, but Blockbuster was easy. We won the vote by a huge margin. Antioco was really unpopular among shareholders.
I want to clarify a few things here. It’s not true that I controlled Blockbuster’s board. The two directors I brought in were independent, experts in the media industry, and not “my guys”— they sometimes voted against my position. I’m also not so domineering in the boardroom. During the dispute over Antioco’s 2006 bonus, for instance, I was strongly against giving him the money, but even his friends on the board were irate about it. His departure wasn’t just my wish — the board was not unhappy when he left.
Click here for the entire article: http://hbr.org/2011/04/how-i-did-it-blockbusters-former-ceo-on-sparring-with-an-activist-shareholder/sb1
