Suggests Board Make Chairman Separate Position

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CHICAGO ( -- As weeks pass in the search for a new chief executive for Coca-Cola Co., at least one analyst is urging the board to give the job to an internal candidate, Steve Heyer.

William Pecoriello, a beverage industry analyst for Morgan Stanley, is urging Coca-Cola's board to elevate Mr. Heyer, the beverage company's president and chief operating officer, to the post of CEO.

Separate the job
"As the movement to separate the

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chairman and CEO roles in U.S. corporations expands, we believe the board of directors at Coke should seriously consider the move," Mr. Pecoriello wrote in a March 22 letter "addressed" to Coke's board. "We strongly believe that Steve Heyer should be the leading candidate for the CEO position and that a scenario where a non-executive chairman is brought in ... is an attractive option."

With the increased scrutiny focused on corporate governance, companies including Walt Disney Co. are increasingly talking about splitting chairman and CEO posts.

Coke's board has set up a seven-member hiring committee to conduct the search with recruitment firm Heidrick & Struggles.

Coke: One person
"We have considered it [separating the position] and at this point we're looking for one person," said Jimmy Williams, a retired chairman-CEO of Sun Trust Bank and a member of the hiring committee.

He said the board was looking for "what you would expect" from such a candidate, someone with experience running a global company, preferably in consumer products. He said the board hoped to see "more than one and less than 10 candidates."

Mr. Williams said recruiter Heidrick & Struggles has yet to present any candidates to the board. He added the board is conducting the search "as quickly as we can to do it right."

The brouhaha over who Coke should hire for the CEO position began last month when the company's current chairman-CEO, Douglas Daft, announced his retirement at the end of the year. Mr. Heyer, who is widely viewed as a marketing visionary, joined the company in 2001 and skyrocketed to a prominence that made his ultimate ascension to the top spot seem a sure thing. In fact, the first round of news reports on Mr. Daft's Feb. 19 announcement widely speculated that Mr. Heyer would quickly be named his replacement. But Coke's board reportedly is split on Mr. Heyer's suitability for the top spot.

Making a case for Heyer
Mr. Pecoriello pointed out several factors he believes bolsters the case for Mr. Heyer:

  • Mr. Heyer is the architect of the Atlanta-based company's strategy -- a three-step plan to drive profitable growth rather than simply growing volume -- which Mr. Pecoriello said is on the "right path";

  • Mr. Heyer has three years vested in the company and "gets it";

  • Mr. Heyer supported by the large "anchor" bottlers, large bottlers in which that Coke has an equity interest.

    "This fact can't be ignored by the board, in our view," he said. "The anchor bottlers have one of the most important voices in the Coke 'system' and are a critical component of executing the strategy. It has taken years to realign the bottlers with Coke and a new CEO could disrupt the momentum."

    'Change agent'
    More pointedly, under the heading "change agents need to be tough," he said that "its important to remember that he was brought in to be a 'change agent' and 'change agents' aren't always the most popular in their first few years."

    Manny Goldman, a former analyst turned consultant, said that unless the chairman post is filled by an insider, it would be a rare candidate that would be willing to split duties with Mr. Heyer.

    "If Coke is looking for a chairman from the outside, nobody is going to come in as chairman and not CEO," he said. He cited the typical corporate practice of bringing in a new CEO that works with a chairman who has been a longtime company veteran.

    Someone 'substantial'
    "This is different," he said. "If [Coke] wants someone substantial, then they're not going to get someone coming in as chairman without the CEO designation. The CEO is the key position and if [Mr. Heyer] is going to be CEO you might as well make him chairman. If he's not good enough to be chairman then how can you make him CEO?"

    Mr. Goldman predicted that Mr. Heyer would "most certainly" leave the company if an outsider is made chairman. He also suggested that debacles such as the U.K. recall last week of Coke's Dasani water brand, could be blamed on Mr. Heyer.

    "It may not hurt him, but it certainly won't help him," he said.

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