A Knight With Thick Armor For Ibm

Last October, 50 United Auto Workers noisily picketed outside the gates of Charles F. Knight's tony suburban St. Louis residence. The Emerson Electric Co. chairman is no friend of organized labor: He ties 10% of his division managers' bonuses to keeping their plants union-free. But the UAW singled out Knight because he is a director of Caterpillar Inc., which the union wanted to pressure into reopening contract negotiations. The tactic failed: Neither Knight nor Caterpillar has budged from the company's last offer, and talks remain at an impasse.

In this age of constant corporate restructurings, executives who don't fear bare-knuckle confrontations are in high demand--and Chuck Knight is no exception. Indeed, he recently took on a passel of new problems when he agreed to become IBM's newest director. That's hardly an enviable assignment. On July 27, Big Blue reported the second-largest quarterly loss in corporate history--$8 billion--as it took an $8.9 billion charge for 35,000 layoffs and other restructuring moves. More recently, Knight has been mentioned as a possible successor to Kay R. Whitmore, the ousted Kodak chief. Emerson even broke its long-standing policy of not commenting about rumors to proclaim that Knight "is not a candidate."

BULLET-BITING. Why does Knight's name come up when there's a tough job to be done? Although he served with new IBM CEO Louis V. Gerstner Jr. on the Caterpillar board, he is little known to the general public and rarely talks to the press. But he's admired in top executive ranks for racking up a nearly matchless string of record earnings, while building Emerson into a world-class manufacturer. The Emerson CEO also has participated as a board member in overhauls at troubled British Petroleum Co. and Caterpillar. Says BP Chief Executive David A.G. Simon: "If there are bullets to be bitten, he will not hesitate to say, `Go bite them."'

It's true that outside directors don't typically have huge influence over companies' restructurings, but IBM recently changed its board to give the directors more say. If Knight takes an active role, his experience could be key: He's a skilled strategist with top-notch manufacturing knowhow and financial acumen--all the things that presumably attracted IBM. The negatives: He's no technology guru, and he may be getting stretched too thin.

He certainly has had his hands full at Emerson. At 57, he has been its chief for 20 years and has made it a tough competitor in such largely mature and unglamorous markets as motors and valves. But Knight has reduced Emerson's dependence on supplying lower-margin goods to U.S.-based appliance and other consumer-durables makers by moving into faster-growing global markets, such as process controls. He also has shifted some underperformers into joint ventures, while expecting Emerson's remaining divisions to hack out 6% to 7% of costs each year.

The repositioning has worked. Products developed within the past five years bring in 23% of sales, vs. 9% in 1982. About three-fourths of all sales come from products with No.1 or No.2 global positions. In fiscal 1993, ending Sept. 30, profits will grow 8% on sales of $8.3 billion, to about $716 million (chart).

Once Knight sinks his teeth into a job, he doesn't let up. At beleaguered British Petroleum, he joined with the rest of the board in the 1992 dismissal of Chairman Robert Horton, a friend. And as a trustee for Washington University in St. Louis, he led a 1981 study of its business school that made sweeping recommendations to improve its quality and reputation. Although Knight is no longer a trustee, "he has remained involved right up to today," says Dean Robert L. Virgil, "questioning me about things," such as choosing faculty. The school has climbed into the top 20 in BUSINESS WEEK's rankings.

Knight's hard-charging style runs in the family. His father founded Lester B. Knight & Associates Inc., a Chicago engineering consulting firm. After earning a bachelor's degree in mechanical engineering and a master's in business from Cornell University, Chuck joined the family business and served as a consultant to Emerson before being recruited, at 37, as heir apparent. Now, his oldest son, Lester B. Knight, 34, is rising at Baxter International, where he manages the $4 billion hospital-supply business.

With so little free time, why is Knight taking on the huge headache of joining IBM's board? He isn't talking, but a director who sits with him on one board says he accepted the post only reluctantly. After all, Knight already serves on five other boards, including Baxter, Southwestern Bell, and Anheuser-Busch, and is active in a number of community groups. Another director worries that Knight is becoming "overstretched," adding: "We don't see him as regularly" at meetings.

For publicity-shy Knight, perhaps the biggest challenge will be adjusting to the visibility of the new assignment. He isn't likely to run into union problems at Big Blue, but he won't be able to duck the intense spotlight focused on every move made by the struggling computer giant. But if Knight does help IBM set a new path, publicity is a problem he can probably live with.

Before it's here, it's on the Bloomberg Terminal.