DuPont Said to Look Outside for Next CEO After Activist Pressure

  • Working with recruitment company to find successor to Kullman
  • `Deeper restructuring isn’t easy for an internal guy to do'

DuPont Co. is looking at external candidates for its next chief executive officer. If it chooses an outsider, it’ll be the first time in 213 years the chemical maker will be led by someone who isn’t a Du Pont or have a long history at the company.

The break with tradition comes after Chairman and CEO Ellen Kullman unexpectedly announced her retirement this month, just as DuPont cut its earnings forecast and an activist investor signaled its battle to break up the company isn’t over.

The DuPont board is looking for an outsider who can implement changes, similar to what Ford Motor Co. did by bringing in Boeing Co. executive Alan Mulally, said a person familiar with the Wilmington, Delaware-based company’s strategy. The directors are working with executive-recruitment company Heidrick & Struggles International Inc. to find a successor, said two other people familiar with the matter. All three people asked not to be identified because the recruitment process is confidential.

"A deeper restructuring isn’t easy for an internal guy to do," said Hassan Ahmed, an analyst at Alembic Global Advisors in New York. "Most of the internal guys are Ellen’s lieutenants."

Narrow Victory

On outside appointment may be welcomed by Trian Fund Management, the investment firm led by Nelson Peltz, which lost a proxy fight in May in a bid to break up the company and is DuPont’s fifth-largest shareholder. On Oct. 5, hours before Kullman said she was stepping down, Trian co-founder Ed Garden said the firm had increased its stake and that “the DuPont story is not over.” Trian declined to comment on DuPont’s recruitment of a new CEO.

DuPont’s victory over Trian in May was narrow and investors have grown anxious for change as the stock price has tumbled, Ahmed said. The shares have declined 19 percent since Trian’s slate was defeated compared with a 3.8 percent decline in the Standard & Poor’s 500 Index. An outsider who gets along with Peltz could head off another showdown, said John Roberts, a UBS Securities analyst. Investors and analysts say these five DuPont outsiders could be in the frame as the next CEO:

  • Ed Breen, 59, was appointed as a DuPont director in February and is serving as interim chairman and CEO while leading the search for Kullman’s replacement. He’s best known for running Tyco International Plc after his predecessor, L. Dennis Kozlowski, stole millions of dollars from the company. Breen broke up Tyco while focusing on fire-detection and security systems, tripling investors’ money during his decade at the helm. “For him, nothing is sacred,” said Kevin Walkush, a portfolio manager at Jensen Investment Management in Portland, Oregon. “Reputationally, he’s also a pretty good operator.” Breen was one of two directors praised earlier in 2015 by Trian for their “fresh, independent, highly relevant perspectives."

  • Jim Gallogly was the other director publicly endorsed by Trian, which tried to recruit him for a slate of nominees to the DuPont board. Trian dropped the offer after Gallogly insisted he get the job of DuPont CEO, Peltz said in April. Gallogly denies the claim. Whatever the truth, Gallogly, 63, boasts an impressive resume that spans oil and gas giant ConocoPhillips, six years running Chevron Phillips Chemical Co. and five years as CEO of plastics maker LyondellBasell Industries NV, which he led out of bankruptcy. Investors who got in when LyondellBasell resumed trading in 2010 quadrupled their money by the time Gallogly stepped down in January.

  • Dennis H. Reilley, 62, is no stranger to DuPont, having worked there for 19 years and rising to chief operating officer. He left in 2000 to run industrial gases company Praxair Inc., where he did a "fantastic job," routinely outperforming competitor Air Products & Chemicals Inc., according to Alembic’s Ahmed. Reilley is currently the chairman of Marathon Oil Corp. and a director at Dow Chemical Co. He became a Trian adviser in January.

  • Chuck Bunch, 67, is chairman of PPG Industries Inc. and was CEO until he stepped down last month. During a decade running the company, he sold the chlorine and eyeglass-lens units and made acquisitions that turned PPG into a company focused almost exclusively on paints and coatings. Earnings more than doubled and shareholder returns quadrupled. He served alongside Peltz on the board of HJ Heinz Co. "Bunch transformed PPG and is very well respected by investors," Ahmed said. "The flip side is he created a very focused company, so would he be the right guy to run a diversified portfolio at DuPont?"

  • Joe Harlan, 56, has been at DuPont competitor Dow for four years and is currently vice chairman and chief commercial officer. Harlan worked for a decade at 3M Co., the heavily diversified manufacturer of energy, electronics and safety products and a company that DuPont regards as a peer. He was considered for the CEO job there before coming to Dow, according to UBS’s Roberts. Prior to that, Harlan spent two decades at General Electric Co., including a stint in the plastics business that competed with DuPont. “He really looks like the right guy” for the DuPont job, Roberts said.

              
DuPont’s board “is conducting a thorough search for the best possible candidate to serve as the next leader of DuPont,” said Dan Turner, a company spokesman. Breen, Gallogly, Harlan, Reilley and Heidrick & Struggles didn’t respond to requests for comment. Bunch declined to comment on DuPont’s search for a new CEO.

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