The Coke Board Gets It: A Lesson in CEO Succession
By William J. Holstein

December 10th, 2007 @ 2:33 pm


Categories: General, Management, Hiring, Board Management, CEO Succession, Best Practices

Tags: Succession, CEO, Coke Board, Corporate Governance, Recruitment & Selection, Operational Accounting, Business Operations, Corporate Law, Human Resources, Workforce Management, Finance, William J. Holstein

Bravo to the board of Coca-Cola and Chairman and CEO Neville Isdell: This is how to handle CEO succession.

Isdell, who is 64, announced he would step down as CEO and turn over the reins to Muhtar Kent, 55, who had been serving as president and chief operating officer.

After a series of botched efforts following the death of CEO Roberto Goizueta, this transition was so smooth that no one will feel it, which is exactly the way it’s supposed to work. And Isdell’s timing was right. He wanted to announce it before the transition became the subject of widespread speculation, which would have turned him into a lame duck. “To do it smoothly, you have to get ahead of speculation that tends to come in these instances,” he told the New York Times.

It appears that the Coke board, which was responsible for the disastrous pick of Doug Ivester as CEO following Goizueta’s death, essentially allowed Isdell to manage the CEO succession process. He and Muhtar have known each other for 20 years. Other lessons from the Coke transition:
Internal promotion of CEOs is vastly preferable to going outside and hiring a hotshot. The outsized packages that were paid to Robert Nardelli, for example, to lure him to Home Depot are simply not necessary in these internal promotion cases. That’s smart.
Isdell stayed for four years as CEO. That’s about average. But it shows how little time CEOs really have in office. Their most important act may be finding the next guy or gal to follow them.
Global foresight. With two-thirds of Coke’s revenues outside the United States, the appointment of a dual Turkish-American citizen to run the company speaks volumes about where growth is going to come from. Archrival PepsiCo, likewise, named Indra Nooyi as its CEO. An Indian, Nooyi will also push Pepsi’s international profile.