Office Depot, OfficeMax CEOs face off in unorthodox search
Office Depot Inc. and OfficeMax set up a competition of the bosses, saying they'll wait to pick whether either of their chief executive officers will be in charge when the companies merge.
The decision not to decide may lead to management challenges later, said executive recruiters and corporate governance experts who were unable to recall a similar case. The shares of both companies declined Wednesday, with Office Depot dropping 17 percent in the biggest plunge since April 2010.
"We always tell our students that you need to decide three things before a merger: price, board of directors and CEO," said Jay Lorsch, a professor at Harvard Business School in Boston who has studied boards and management for 25 years. "I don't think this bodes well for the merger if they can't agree on a CEO. I've never seen anything like it."
A board with equal representation from each company will be created and a new CEO will be chosen after the deal is complete. Neil Austrian, Office Depot's 72-year-old chairman and CEO, and Ravi Saligram, the 56-year-old president and chief executive of OfficeMax, will both be considered in the search and maintain their jobs through the process, the companies said Wednesday in a statement.
Questions of leadership are usually decided before a deal is finished. Creditors of bankrupt AMR Corp., the parent of American Airlines, picked US Airways Group Inc. CEO Doug Parker to run the merged company. They made that call even after American's chief executive, Tom Horton, pushed to retain the job, people familiar with the decision said last week.
Office Depot agreed to buy Naperville, Illinois-based OfficeMax for $1.17 billion after losing sales to online rivals and to Staples Inc., the largest U.S. office-supplies chain. Regulatory approvals, including one from the Federal Trade Commission, will take seven to nine months and the companies will operate as competitors until then, Office Depot's Austrian said Wednesday on a conference call.
"It would be premature to select a CEO until we understand what the FTC is going to do," Austrian said in response to questions from analysts about the decision not to select a new CEO.