You’ve undoubtedly followed with interest-if not a bit of morbid curiosity-the fortunes of Motorola Inc., which has slipped in less than a year from chest-thumping world-beater to chastened challenger.
Add a whiff of danger: Carl Icahn, dissident, billionaire investor, has pursued a seat on Motorola’s board, against the latter’s wishes, as represented by Ed Zander, CEO and board chairman.
“It certainly creates drama,” said Carl Howe, analyst at Blackfriars Communications Inc. “It’s a little like watching a gazelle chased by a lion.”
Despite that picturesque analogy, however, the rhetoric from both sides has gone from reasoned argument to personal attacks in the past few weeks, perhaps alarming investors who seek to protect and grow their hard-won stakes in the company.
In light of all this, Monday may turn out to a very long day for those closest to the action.
Motorola’s annual shareholders’ meeting-at which shareholders decide if Icahn joins the board-is set to begin today at 4:30 p.m., local time, in Rubloff Auditorium at The Art Institute of Chicago.
Motorola was unable to provide information on when results of the directors’ election would be available, but presumably the news will come swiftly.
What’s at stake
Whether Icahn wins a seat on the board is but the first in a series of questions that investors and the wireless industry will surely pose.
If Icahn wins, what’s on his to-do list? How will he go about influencing the company?
Icahn’s prescription for Motorola has evolved since January, when he suggested an aggressive stock buy-back program to shore up the value of the company’s shares-a plan under way at Motorola that has accelerated in response to Icahn’s pressure. Last week, Icahn suggested that if a swift turnaround isn’t in the offing, Zander should go.
As to the methods available to dissident shareholders who land on a board, the powers of persuasion are paramount, according to Dan Konigsburg, director of corporate governance at Standard & Poors, the corporate debt rating firm.
Major investors such as Icahn tend to be “enormously persuasive people,” Konigsburg said.
“They arrive on the board with an automatic platform,” he said. “The shareholders have voted for them. And that platform is there because the company is under stress, perhaps with declining stock values. A dissident can argue he has a mandate for change.
“These people tend to be persuasive personalities with a strong point of view and the willingness to fight for those views,” Konigsburg said. “Corporate boards tend to be consensual, collegial groups. They tend not to be debating societies.”
Standard & Poor’s tracks major, dissident shareholders closely, according to Konigsburg, because the interests of shareholders and corporate creditors can be at odds. Dissidents on corporate boards may pursue policies that don’t jibe with good credit practices.
In contrast to this view, Ginny Lee, analyst at Technology Business Research Inc., suggested that the avenue for change may depend on the goal at hand.
Icahn might pursue key committee assignments, depending on his goals, she said. Motorola’s 11-member board must staff five committees, including executive, compensation and leadership, governance and nominating, finance and audit and legal.
“If Icahn gets elected, he will want to be on the ‘compensation and leadership’ committee,” said Lee. “He would then be able to oust Zander.”
Is this really the end?
Whatever the outcome of Monday’s meeting, however, questions are likely to linger for some time.
If Icahn fails to gain a seat, how will Zander and his board go about resurrecting the company’s profitability and competitive momentum? What substantive actions will the company take and how will it signal its new direction to investors and the wireless industry, in which many suppliers and customers await news of the company’s direction?
Such meaty questions must also weigh on the minds of Motorola’s approximately 66,000 employees worldwide; the company’s workforce has already been reduced by 3,500 employees in past months as the company sought to reduce overhead.
In contrast to the complexities involved in turning the company around, the agenda at the shareholders meeting in Chicago today is fairly simple-though it may obscure impassioned arguments to be made inside the Art Institute, where an exhibition of avant-garde painters soon ends its run. Icahn may well deliver his argument that he’s “just like” ordinary investors, concerned only about Motorola’s health and future fortunes, while Zander articulates why Moto execs “get it” and “know what to do” to turn around the company-as, nearby, cryptic portraits by C
