Spring Cleaning

PHOTO-ILLUSTRATION FOR TIME BY GARETH BURGESS

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What are today's companies looking for in a shiny new CEO? Talk of vision and synergies has been replaced almost everywhere by a laser-like focus on profitability. Debt and heavy-handed micromanagement are out; sustainable earnings and delegation of authority are in. Some corporate crises, such as Parmalat's, may be too big for any mortal to solve completely and point to the need for broader regulatory changes. But the new boys women remain rare in the top jobs in corporate Europe are under enormous pressure to untangle the failed legacy of their predecessors as fast as possible. Here's a look at key factors that help determine whether spring cleaning in the CEO's suite is enough to turn a company around.

The Need for Speed
One obvious yardstick of success or failure is stock price. The companies whose stock is bouncing back the fastest are usually those whose new leaders have acted most quickly to tackle their core problems. In Britain, Cable & Wireless stock is up 50% since Italian turnaround expert Francesco Caio took over a year ago. He swiftly shed unprofitable operations his predecessor had bought in the U.S., including a big Internet hosting business, but had been reluctant to sell when they didn't pan out. At ailing insurer Royal & Sun Alliance, Andy Haste, 41, the CEO who took over last year, wasted little time in raising $1.8 billion in fresh capital and cutting 20,000 jobs. In Switzerland, Credit Suisse stock has risen about 40%, easily outperforming most rivals, since the bank ditched Lukas Muhlemann at the beginning of last year and replaced him with two bank veterans, Oswald Grubel and John Mack. They quickly took major write-offs to deal with festering operational troubles. The jury remains out on some of the new CEOs, including Michael Diekmann at Allianz and Giuseppe Morchio at Fiat.

No Rock Stars Wanted
The brash, swashbuckling style of fallen supermen like Messier who referred to himself as a "master of the world" and published two autobiographies, one while he was CEO and a sequel after he was ousted has been consigned to history, for now. "The extreme case of 'the company, c'est moi' is behind us," says Booz Allen's Newkirk. At engineering giant ABB, based in Zurich, Jurgen Dormann stunned senior managers by telling them in one of his first meetings after taking office in September 2002, "I don't like to work too hard or take decisions. You do that." It was a playful way of signaling that he intended to delegate operating management to his subordinates, and it marked a dramatic change for a company whose former leader, Percy Barnevik, imposed a rigid top-down culture.

Dormann's breath-of-fresh-air approach continued with a companywide email urging staff members to stop making PowerPoint presentations for one another. "Consider this," he wrote. "Somewhere among the dazzling presentation techniques ... I sense a creeping loss of substance." That struck a chord. "Bravo!!! I am so tired of executives jamming phony presentations down my throat," a U.S. regional manager e-mailed back.

Debt Is Bad ...
Nothing on corporate balance sheets so symbolizes the excesses of the 1990s as the towering debt left behind by fallen CEOs who couldn't control their acquisitive urges. Accordingly, their successors are deleveraging. The prize for the biggest reduction goes to Thierry Breton, a sometime science-fiction novelist who moved from Thomson to take over France Telecom in September 2002. He is paring the France Telecom work force by about 22,000, or 15%, mainly through attrition, and he has linked the pay of thousands of managers to tough performance targets. Debt tumbled from $66.7 billion to $51 billion in his first year, in part because Breton persuaded the French government and bondholders to put up fresh capital. Coming in a close second is Jean-Rene Fourtou, 64, a drug-industry veteran who took over France's teetering Vivendi two years ago, and is turning it around (see next story).

... But Excess Is Worse
Executive compensation has become a hot button for investors, who are increasingly unhappy about overpaying for underperformance. By U.S. standards most European executives aren't lavishly paid, but they have been trying to catch up. Not anymore. The board of British drug firm GlaxoSmithKline cut the pay package of CEO Jean-Pierre Garnier last December after shareholders voted it down at the annual meeting. (He still earned $5 million last year in salary and bonus, a 14% raise.) Even at Ahold, which was in need of a white knight following an accounting scandal last year, the new CEO, Anders Moberg, faced a storm of criticism over his guaranteed $1.68 million bonus for each of his first two years. That was on top of a $1.68 million salary and stock options as well as a hefty exit package. Moberg, a Swede who formerly ran Ikea, eventually agreed to take a lower salary and link his bonus to the firm's performance. At Germany's Bertelsmann, one of the first moves by Gunter Thielen when he took over in August 2002 was to abolish the office of the chairman and the post of chief operating officer. Both had been created by predecessor Thomas Middelhoff in an attempt to consolidate power at the firm. "Thielen came in and said, 'Decentralize,'" says a senior Bertelsmann official. "More than anything, that restored calm." Thielen, a 24-year company veteran who also runs a small sausage factory in Saarland and a dental lab on the side, won a power struggle with the chairman of the company's supervisory board over plans to merge Bertelsmann's music division and Sony and in January had his contract extended by two years, to August 2007.