Back in late 2000, William S. Stavropoulos installed his successor, completing what he thought was his final and perhaps most enduring job as chief executive of Dow Chemical Co. (DOW ). He was wrong. As careful as Stavropoulos had been in selecting 32-year Dow veteran Michael D. Parker, the company quickly foundered. Parker -- groomed during boom times -- ordered layoffs, but was slow to cut spending. Dow swung from seven consecutive years of profits to back-to-back losses. Parker was sacked, and Stavropoulos, who had moved on to chairman, was back in his old office.
Now, Stavropoulos has stepped down again. He's still chairman, but he turned over the CEO post last fall to another Dow lifer, Andrew N. Liveris. This time, the new guy, who's already built a reputation for his tightfisted ways, looks like he'll keep the job. "Stavropoulos left large shoes to fill," says Kevin W. McCarthy, an analyst with Banc of America Securities (BAC ). "Liveris seems to be up to it."
Despite the best intentions of boards, the executive suite often has a revolving door. At least once a week, on average, a company in the Standard & Poor's 500-stock index gets a new chief. Including Dow, five BusinessWeek 50 companies got new bosses in 2004. But Corporate America doesn't always get it right. "The person they have might be ideal if the company's in a static environment," says Marc S. Effron, who heads the leadership consulting practice at Hewitt Associates Inc. (HEW ). "But how many companies are really in a static environment?"
Certainly not Dow, No. 45 on the list. When Parker became CEO, the industrial economy was sinking into its worst recession in a generation. Moreover, Dow had just completed a $11.6 billion takeover of Union Carbide Corp. -- its biggest ever -- which weighed the Midland (Mich.) company down with debt. Today, the cycle has shifted drastically: Demand for Dow's chemicals and plastics is rising worldwide.
The difference between this hand-off and the last one is more than a matter of timing, however. Parker, who is now CEO of British Nuclear Fuels PLC and declined to be interviewed, was slow to react to the downturn, say analysts and Dow execs. Within weeks of retaking control, Stavropoulos ordered a pay freeze and began targeting plants for shutdown. He also launched a search for a successor. Before, the board left the vetting pretty much up to Stavropoulos and the search committee. This time, every director interviewed each of three finalists, quizzing them about how they would get the most from Dow's assets and money. Detailed answers were required in writing.
After five months of scrutiny, the board went with Liveris, an Australian who had joined Dow in Hong Kong in 1976 and had risen to president of Dow's performance chemicals unit. But Liveris didn't go straight to the corner office. He was promoted first to chief operating officer, in late 2003. The board also spelled out his duties on paper so that directors could evaluate his progress. Liveris hasn't fiddled around. He ordered price hikes to offset soaring raw-material costs and announced another round of mass layoffs. Liveris also sought advice from as many people as he could -- by his count, he met with more than 60 CEOs before he started Nov. 1. And he regularly turned to Stavropoulos for guidance and support.
Inevitably, the business cycle will turn against Dow. To prepare, Liveris, 50, vows to hold capital spending below depreciation, with more of Dow's minimized budget going into low-cost sites outside the U.S. He doesn't see the need for more layoffs, after cutting 6,700 employees, or 13.5% of Dow's workforce, in the past two years. But Liveris says he'll be miserly about hiring during the upturn. Will it work? Stavropoulos hopes so. At age 65, he wants his retirement to last this time around.
By Michael Arndt in Chicago