Wednesday, February 10, 2010

George Cloutier Tackles the Tough Stuff

The New York Times caught up with George Cloutier for a Q&A interview in today's edition. Cloutier is the savior you call in when your business is in trouble. As the head of turnaround firm American Management Services Inc., he has a no holds barred, no sacred cows approach to restructuring for survival. The Times captured his tough talking, tough love manner quite appropriately with how it titled its article: "Fire Your Relatives. Scare Your Employees. And Stop Whining."

Cloutier wrote down his turnaround game plan last year in a book, Profits Aren't Everything, They're the Only Thing [HarperBusiness]. I ran an excerpt from it in the Third Quarter 2009 edition of Directors & Boards — his chapter on facing (and embracing, with no shame) Chapter 11. Brutally realistic, it is sound advice on bankruptcy for all directors of troubled companies.

I first met George in 2004, when he was a panelist at the Weinberg Center for Corporate Governance at the University of Delaware. My close colleague and editorial advisory board member, Charles Elson, puts on superb panel discussions several times a year at the business school. This one was on "Handling the Dissident Director." I did not know George but, considering his background and expertise, should not have been surprised to find him on this panel. He was there drawing on his experience as a director of Circon Corp., a justly famous case of two dissident directors (Prof. Elson being one) who were elected to the medical devices company board and what then ensued with these dissidents in the board mix. Fascinating stuff.

Considering the fire-breathing that Cloutier brought to bear in his book and Times interview, what he had to say that day about bumping up against a dissident director sounds downright restrained. (Actually, knowing what I know about him today, I would have expected him to be one of the dissident directors involved.) You can't get much more calmly professional than this in terms of the dealing with a dissident:

“Depending on the maturity level and the rationality of the dissident directors, I think they can play a very strong role. They remind the rest of us on the board that there is another view of life, which is very important for all of us to have. Secondly, it forces the non-dissidents and the management to sharpen their attitude, sharpen their mental responses and, most importantly, to sharpen their management performance on the job. [So] I’m on the side of 'Let’s bring them on' — as long as it is civilized. Shouting, yelling, and screaming do not serve a purpose. On balance, people who are elected dissident directors are mature, honest individuals with a strong point of view. To keep them out of the process would be a big mistake.”

In contrast to the Times interview, which drew a bevy of heated comments about his no-frills management techniques, who could challenge this statesmanlike position that Cloutier puts forward for handling fellow directors who are dissenters.

As fiery brimstone as Cloutier may come across in his book and press coverage, it sounds to me like he is a pussycat compared to the other Circon dissident director talked about at that panel discussion — former Marine General Victor Krulak. Listen to this Cloutier remembrance of serving on the board with this fellow director: "Known as 'Brute' Krulak, he had served in Vietnam as the Marine commander, and he did not take any prisoners from day one. He opened each Circon board meeting with a resolution to fire the CEO, which created a certain amount of emotional turmoil for the first half-hour."

I would guess so, which makes Cloutier's approach for handling dissidents even more remarkably dispassionate.