The resignations of RIM's CEOs should signal to investors that the company is finally serious about changing course. But is it enough?
The announcement by Research In Motion's Jim Balsillie and Mike Lazaridis that they are resigning as co-CEOs and co-chairmen is intended to send a signal to investors that the company — finally — is serious about changing course. Choosing an insider to replace them as CEO, however, dampens the message significantly and suggests RIM isn't fully ready to embrace radical change.
After months of speculation, investor-led pressure and controversy, the embattled chiefs announced the immediate appointment of Thorsten Heins as President and Chief Executive Officer. Mr. Heins, who joined RIM in 2007, was most recently the company's Chief Operating Officer and came to Waterloo from Siemens, where he had been communications division CTO.
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The company also confirmed earlier speculation over the leadership and composition of its board. It's bringing in former Royal Bank of Canada COO Barbara Stymiest as its first-ever independent board chair. Former lead director John Richardson remains on the board, while Fairfax Financial Holdings CEO Prem Watsa joins an expanded 11-member board. Notably, Mr. Laziridis and Mr. Balsillie will continue to sit on the board.
Ms. Stymiest, who was formerly CFO at the Bank of Montreal, CEO at the Toronto Stock Exchange and most recently COO at the Royal Bank of Canada, joined RIM's board as an independent director in 2007 and has been one of a seven-person committee studying the board's structure since last July.
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The governance review committee was struck as a compromise after a major shareholder, Northwest & Ethical Investments Inc., first withdrew an earlier demand to separate the chair and CEO. The committee had been scheduled to table its recommendations by the end of this month, after which the full board — including Mr. Balsillie and Mr. Laziridis — would have had 30 days to respond. While the company has not commented on how the just-announced leadership changes will affect this process, it's likely much of the committee's work has just been rendered moot.
Will the CEO resignations at appease RIM investors?
The changes at the top do little to ease the immediate challenges facing the Waterloo company — and likely come too late to appease investors who abandoned the company's shares over the past year, driving them down by 75 percent in the process.
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RIM is still looking down the barrel of a difficult year thanks to continued delays in launching updated smartphones based on its next-generation operating system — they've now been pushed to the second half of this year — and its ongoing inability to ignite demand for its stillborn PlayBook tablet. The company faces additional market erosion as far more agile competitors like Apple and Google continue to pull away with a relentless succession of new products, and it's unclear whether the leadership change will be enough to placate the masses who had been calling for the two chiefs' heads, and see the current shakeup as too little, too late.
Activist-investors hold both Mr. Balsillie and Mr. Laziridis accountable for the company's 2011 market meltdown and for its failure to keep pace in the wireless market it practically invented just over a decade ago. Their exit may placate some critics, but leadership change means little until new products hit the market.
As much as the updated leadership structure finally breaks the chair-CEO connection — which both Laziridis and Balsillie had long contended was key to their continued effectiveness as leaders — and represents a fundamental and long-anticipated sign of change within a company that has largely resisted it, it isn't enough to turn the tide.
Former RIM CEOs will continue to exert influence
First, the two now-ex-CEOs remain on the board — Mr. Balsillie as a member and Mr. Laziridis as vice chair. While there's some merit to them sticking around in some form of advisory or consultative role, their continued presence in the boardroom will potentially hold the updated board membership back as it attempts to shape a new direction for the company. It isn't clear whether a new board with new leadership will be able to overcome the continued presence of the two polarizing ex-CEOs. The now-former leaders could have easily served the company in a non-leadership role that didn't come with keys to the boardroom.
Second — and probably more pivotal to the company's future — is the choice of Mr. Heins as CEO. While it's too early to predict how effective Mr. Heins will be in his new role, he was and is a company insider at a time when RIM would have been better off casting a broader net. No one doubts that he is a superbly experienced industry vet — he was most recently RIM's COO, and has been in the telecom space for almost 30 years — but he isn't coming into the role with the fresh set of eyes that companies in need of radical transformation typically seek.
Selecting Mr. Heins gives RIM a sense of continuity and familiarity as it prepares for the most critical few months in its history, but if the company had been truly serious about reinventing itself, it would have looked to someone from either another company or another industry entirely. It's been done before, most notably at Ford.
The automaker in 2006 was widely considered to be the most at-risk of the former Big 3 when it tapped Alan Mulally, then-CEO of Boeing Commercial Airplanes, to engineer its turnaround. Mulally had done exactly the same thing at BCA, helping the company fend off a strong challenge from European competitor Airbus and ultimately regain leadership in a market it once dominated. Mulally's quick and deep-rooted restructuring efforts at Ford are largely credited with helping the company weather the auto sector meltdown without receiving government bailout money and without going through bankruptcy.
It's a lesson RIM might have considered as it plotted its own future in the runup to Sunday's announcement. Within a beleaguered company in desperate need of a cultural revolution, the just-announced leadership changes keep too much of the old guard in place to make much of a difference.
Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own. carmilevy@yahoo.ca
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