Blog: Succession battle
Chris Brook-Carter | 23 February 2004
The announcement that Coke CEO Douglas Daft is to step down certainly took just-drinks by surprise, even though a number of analysts are claiming they had already seen the writing on the wall. I was expecting Daft to hang around for another year or so, to give his heir apparent, Steve Heyer, a little more time to bed himself in before taking over the reins.
Though I have no doubt Heyer is up to the job, Coke is a conservative company when it comes to its executive appointments. Daft had already put in around 30 years of service to America’s iconic brand before he was made CEO. By comparison Heyer has a little over three. To some, then, Heyer is still a relative outsider and newcomer.
The result is all a bit of a mess. Rather than announce a smooth transition from Daft to Heyer, a statement attributed to Doug Daft said Coca-Cola would be engaging an executive search company to assist in finding candidates from outside, who could be considered alongside Heyer, currently the group's president and chief operating officer.
It seems a wounding vote of low confidence for Heyer, the man who most thought was being groomed to succeed Daft since he arrived at the company from Time Warner.
The UK’s Financial Times believes the Coke board is split on what best to do. “One thing Steve has helped with is restructuring - that's what he did at (Young & Rubicam Advertising Worldwide) and that's what he did at (Turner Broadcasting),” one person familiar to the situation told the FT. “But there was no real upside in growth in either of those companies when he was done.
“At the end of the day, some members of the board have realised he's not the guy,” the source added.
Certain analysts quoted in the press seem to agree - the constant accusation levelled at Heyer being that he has done little to “prove himself”.
However, the majority view from Wall Street – and one which just-drinks backs – is that this delay is doing more harm than good, unnerving investors and threatening what many believed would be a seamless transition between Daft and Heyer.
Worse still would be for Coke to decide Heyer was not the man for the job, risking uncertainty over strategic direction and the loss of Heyer altogether.
Morgan Stanley's William Pecoriello in a note to investors said Coke's stock price is vulnerable to "a scenario where an outsider is brought in with new ideas/strategies and the resulting departure of Heyer (and maybe others) at a time when Coke's bench is not very deep."
Meanwhile, Credit Suisse First Boston analyst Andrew Conway urged Coke's directors to "move quickly and in a unified fashion to elect Steve Heyer... An outside CEO increases the risk to a successful turnaround. More false starts in execution would be like a pitter-patter of a dripping faucet that can't be fixed."
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