Lawrence Bossidy interview, Oct. 18, 2002
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GEOFF COLVIN: Investors had a good friend in Larry Bossidy when he was CEO of Honeywell International. After a highly successful 34-year career at General Electric, he joined Honeywell as CEO in 1991, back when it was called Allied Signal, and turned it around dramatically, engineering an eight-fold increase in the share price over the following nine years. So he knows as much as anyone anywhere about what kind of managers do, and don't, deliver for shareholders. He retired in 2000 but was brought back last year to get the company back on its feet after its planned merger with General Electric was blocked by regulators. This past June he retired again, this time, he says -- and his wife says -- for good. Larry, welcome.
LAWRENCE BOSSIDY: Geoff, nice to be here.
COLVIN: Investors are looking for good ideas now. Should they bet on individual managers?
BOSSIDY: I think it's more than that. I think they can bet on individual companies, as they do
every day, but I think they have to look at certain factors as they make that choice. They know track records are terribly important. I think it's great to make a judgement as to whether companies are confronting reality, as well. You see annual reports, for example, oftentimes that are nothing more than PR pieces, as opposed to being real expositions of the business. I think it's appropriate to see whether people are doing things new and different and that they have an edge and that they're contemporary. If all those things add up, generally you're going to make a pretty good choice.
COLVIN: Well, you have a new book out, a book called Execution: The Discipline of Getting Things Done co-written with Ram Charan, a consultant. It's doing terrifically. It's been on the business bestseller list for weeks and weeks now. What are the things from that book that are really based on your career that you think could help investors identify good companies?
BOSSIDY: Well, I think there has to be some processes in place to get things done. Now you can't necessarily see that from 10,000 feet, I'd be the first to say. But nonetheless, there can be some at least casual inquiry as to whether there is a good people process. I mean are they in fact prosecuting with enough vigor to identify the best performers? Is there a good strategic plan in place? And by virtue of that, do things change from time to time to moderate in very quick-changing markets? And do they meet their commitments? I mean there's a record it seems to me of people who have a history of meeting their commitments and there's a record for people who don't.
COLVIN: Well, you of course managed on that basis within Honeywell and before that within GE, meeting commitments being really top of the list. What about CEOs who are out there today, really terrific executors, performers who you think have done a terrific job?
BOSSIDY: Well, I think there's a whole host of companies. Colgate-Palmolive, for example, with Reuben Mark; Johnson & Johnson with Ralph Larsen; Emerson with the great run that Chuck Knight had. Obviously General Electric is in that category. So there's lots of companies. Microsoft could be another one that's certainly had a wonderful performance over the last few years. So we're not free of companies that have had great performances in terms of execution.
COLVIN: Now some of those companies, Johnson & Johnson has a new CEO now, relatively new. It's not Ralph Larsen anymore. Similarly Chuck Knight has finally retired from Emerson. Any way to guess whether those companies can keep up the performance?
BOSSIDY: Well, my guess is that at least some of the important criteria for the successors being promoted to that post is that they do have a history of execution themselves and that they'll bring that to the party as they continue to drive these great companies forward.
COLVIN: Yeah. Warren Buffett said, famously, that when a good executive meets a bad business, it's usually the reputation of the business that survives. Do you agree with that?
BOSSIDY: I do. I do think that there are businesses that are so poorly positioned that there's no one who can turn them around.
COLVIN: Right.
BOSSIDY: So I would only counsel people if you're going to change jobs, go to a good company. (Laughter)
COLVIN: Right. Pick the company first.
BOSSIDY: Yes.
COLVIN: And then hope to do a good job there.
BOSSIDY: That's the better way to say it.
COLVIN: Yeah, it makes a lot of sense. CEOs in general, just to shift gears a bit, have gotten beaten up a lot lately. It's been a kind of a rough time. There are a lot of things specifically. For example, your good friend, former colleague, Jack Welch, at GE, has taken a lot of heat for his retirement deal and the perks involved with that. Was the criticism justified?
BOSSIDY: Well, I think probably that CEOs, all of us got lionized to an unrealistic extent in the late '90s, and now I think the pendulum has probably swung to the other side. It will come back to where it belongs in the year or so ahead I think, and that's appropriate. And as far as my friend, you know he did an outstanding job at GE, I mean better than anyone I think in corporate history. And when it became apparent that his perks were not currently in vogue, then he quickly moved to change them. So I'm sure that he's going to be just fine.
COLVIN: Well, I have to ask you along those same lines, I mean you have some retirement perks from your tenure at Honeywell. Any plans for that?
BOSSIDY: Well, they're not very extensive in their notion, so no, I would intend to keep them as I have them now, and if somebody considers at some point it's inappropriate, then I'll surrender them.
COLVIN: Yeah. What about CEO pay in general? It's become a hot topic in the last couple of years with the market suffering so much. You were in that game in a big way for a long time. Did it get out of hand?
BOSSIDY: Well, you know, I think you have to look at it from a little more of an analytical
perspective. It did get out of hand, but it got out of hand because options were worth so much. You know it wasn't too long ago when share owners were advocating more options because they wanted the CEO to be compensated consistent with share owners themselves. Now the markets went way beyond what everybody thought, and as a consequence the options were worth just millions and millions of dollars in many cases, and people began to notice it and complain. This may be self-correcting. In terms of what the market has done, that kind of riches is probably not going to occur for a long time. So it certainly ought to be looked at, but the market itself I think is going to do a lot to put it in a better perspective.
COLVIN: You're on two boards I think, J.P. Morgan Chase and Merck.
BOSSIDY: Yes.
COLVIN: You're very up to date on all the changes, reforms being proposed for governance on boards of directors. Do you think that whatever is eventually instituted will be good for shareholders.
BOSSIDY: I think so far. You know, Sarbanes actually is still being looked at by the SEC, as
is the proposed rules on the New York Stock Exchange. If they are implemented as proposed, I think they'll bring some goodness to the party in terms of what directors are supposed to do and some rules. I would hope they don't go much beyond that because I think you can choke business. And one of the great things about our country is there's more freedom in business than there is in many other places in the world. I'd hate to see that change. But if it goes no further than what I see in those two particular bills, I think we'll be fine, and I think the share owners will be a beneficiary.
COLVIN: Larry Bossidy, thanks for your views.
BOSSIDY: Always nice to be here, Geoff.
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