Greenberg resigns: McD's shuffle signals Bell as heir apparent

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Meet the new boss-same as the old boss.

By tapping James Cantalupo to run McDonald's Corp., succeeding Chairman-CEO Jack Greenberg, who announced his retirement last week, the board of the Oak Brook-based fast-food giant is turning to a retired 28-year company veteran.

The critical question is whether an insider like Mr. Cantalupo-who may be only a stopgap CEO-has the objectivity to see what's wrong with McDonald's and fix it, if the problems even are fixable.

There are certainly similarities between Messrs. Cantalupo and Greenberg. At 59, Mr. Cantalupo is only a year younger than Mr. Greenberg. Each executive is imbued with the McDonald's view of the world, since each has been with the company for more than 20 years.

Indeed, Mr. Cantalupo-who retired as chief of the international division a year ago-is believed to have been the runner-up when Mr. Greenberg was chosen for the top job in 1998.

The current executive-suite shuffle is raising concerns as to whether Mr. Cantalupo can shake up McDonald's.

"Mr. Cantalupo's status as a longtime McDonald's insider will cause some (including us) to take a more cautious stance on the pace of change," Mark Kalinowski, an analyst at Salomon Smith Barney, wrote in a report Dec. 5.

Those close to the company question whether Mr. Cantalupo will be sticking around for more than three years. They suggest the board wants to groom Charles Bell, 42, who is being promoted to president-chief operating officer from president of McDonald's Europe.

Though Mr. Bell represents younger blood, he's still a veteran corporate hand, having begun his career at age 15 at an Australian McDonald's. Nevertheless, he received high marks for his tenure in Europe, where he deftly handled mad-cow concerns and helped boost the chain's performance.

Those close to the board say the Cantalupo-Bell team was chosen because it is the most conservative change the board could make. The executives could not be reached for comment, and a spokesperson declined to elaborate on the changes.

lengthy debate

The directors debated for more than a month whether to oust Mr. Greenberg in light of the company's dismal financial performance and questions about its direction. But a major sticking point was where to turn, according to a person close to the board. Going with a known quantity like Mr. Cantalupo was the "least painful" course, as opposed to going outside in a quest for new blood.

Ron Paul, president of Chicago-based food consultancy Technomic, says the conservative route may prove the prudent one. The new CEO will have to manage relationships with suppliers and franchisees-and that would be no easy task for someone who doesn't know the system.

"I think an outsider would have a tougher job than even Mr. Cantalupo is going to have," Mr. Paul said.

And Mr. Cantalupo will have his share of problems. McDonald's is grappling with increased competition and changing consumer tastes as well as unhappy franchisees who believe the chain has built too many stores.

slow down

Several investors say McDonald's top priority should be to slow down, if not halt, its rollout of new stores in the U.S., boosting its dividend, rather than investing capital in new projects.

McDonald's has to acknowledge the growth limitations and instead run the company like "a cash cow," said Jean-Marie Eveillard, portfolio manager at Arnhold & S. Bleichroeder's $2.1-billion First Eagle SoGen Global fund, which owns 1.8 million shares of McDonald's.

At the same time, McDonald's must improve its service and food, areas where the company performs poorly in consumer surveys.

Mr. Cantalupo, who is credited with leading McDonald's drive into international markets, is seen as having the skills to improve operations.

But Mr. Cantalupo must prove he can look at operations with a critical eye.

"He's going to have to be able to accept the introduction of new ideas because that's what the company needs," said Timothy Ghriskey, president of Ghriskey Capital Partners, a Connecticut-based investment firm that owns McDonald's shares.

Mr. Arndorfer is a reporter for Crain's Chicago Business

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