After The Icon Exits

How companies from Standard Oil to Wal-Mart have fared once their legendary chiefs moved on

Slide Show >>

William H. Gates III has no confusion about his mythic stature in American business. When he announced plans in June to step away from Microsoft Corp. (MSFT ), he acknowledged the importance of "getting beyond the myth of one person doing a high percentage of the things." He regularly invokes the federation of brilliant minds that make up the core of his company.

But Gates also knows how to play on his personal mythology. Interns swoon at the opportunity to go to a summer-ending barbecue at his mansion. Chief information officers leap at the chance for an audience, though it often ends with a sales pitch from Bill. Chinese President Hu Jintao made the pilgrimage to Redmond, Wash., in April just for the chance to dine with Gates. There's no question his departure from day-to-day business two years from now could leave a void.

History shows that a company with the right qualities can weather the passage of a mythic chief executive. It takes a coherent culture that propagates the wisdom of the founder. Senior executives must also understand what made the company great, and see how those lessons apply in a changing landscape. Here are some companies that have faced the challenge:


Standard Oil Co.

Like Gates, Rockefeller led a controversial business life, building a potent monopoly and becoming, for a time, the wealthiest man in the world. His reputation was bruised by run-ins with trustbusters, then burnished by outsize acts of philanthropy. Rockefeller left Standard Oil in 1897, handing the reins to John D. Archbold, who turned out to be even more confrontational. Archbold was combative with regulators. He made no friends in the press. When the government began considering the breakup of Standard Oil, the company had few allies to rally to its side. Perhaps Archbold's slickest move was to persuade Rockefeller to keep his retirement secret. That left Rockefeller to be blamed for many of Archbold's early missteps.


Wal-Mart Stores Inc. (WMT )

As driven as they come, Walton perfected discount retailing with the zeal of a back-country preacher. He started out running a store in Newport, Ark. By the time of his death in 1992, Wal-Mart was a goliath and Walton the world's richest man. His duties initially fell to his family, and then to David Glass, a finance executive who started at the company in 1976. While Glass lacked Walton's charisma, he made up for it with a knack for scaling up Wal-Mart. Discount retailing gave way to Wal-Mart's Supercenters, and Glass's bet on technology and logistics gave Wal-Mart an edge over rivals that it has yet to cede. In recent years, the retailing giant may have lost touch with customers to some degree. It is also struggling with questions about its labor practices, and the sprawl that its stores create. But many of those complaints date back to Walton's time and can't be blamed entirely on the succession.


Sony Corp. (SNE )

The irrepressible co-founder of Sony built the company into a global power by combining clever products, innovative design, and potent brand marketing. A stroke disabled Morita in 1993. His duties shifted to Norio Ohga, and then to Nobuyuki Idei, whose tenure is better remembered for failed restructurings than brilliant product launches. Morita might not have done any better. He barely had a chance to glimpse the wave of globalization that ultimately crushed Idei. Once rivals such as Samsung, Nokia (NOK ), and Microsoft hit their stride in the consumer electronics markets where Sony shined, even Morita's energy and talent might not have been enough to assure clear sailing.


Southwest Airlines Co. (LUV )

Although born in New Jersey, Kelleher embodies the Texas persona that came to define Southwest. He's a hard-charging good ol' boy who revolutionized the modern airline business. He created a corporate culture where employees, including Kelleher, poked fun at themselves. It was a sea change for the airlines, whose leaders often came from the military and infused the system with a stifling bureaucracy. More important, he helped democratize air travel, figuring out a way to offer it cheaply to the masses. The secret was using just one type of jet, Boeing's 737. He offered no meals and no first class. And employees pitched in on tasks outside their job descriptions, making the airline more efficient. Southwest has continued to thrive since Kelleher handed over duties to his hand-picked successors, President Colleen C. Barrett and CEO Gary C. Kelly, because they, too, grew up in the culture of employee focus and operational discipline. And they're intent on maintaining it.


Intel Corp (INTC ).

Grove replaced another legendary CEO, Gordon E. Moore, who predicted the speed with which chips would increase their processing power, creating a time line for the computer industry as a whole. There's no Grove's Law. But the driven, quick-tempered Grove, who escaped from his native Hungary during the 1956 revolution, turned Intel from a money-losing chipmaker into the world's dominant microprocessor company by focusing on manufacturing efficiency. Grove neatly sidestepped the very same type of antitrust battles with regulators that have dogged Microsoft. In 1998 he turned the CEO duties over to Craig R. Barrett, a longtime protégé who lacked Grove's charisma. Barrett largely failed to break Intel out of its PC mold, and his successor, Paul S. Otellini, is now struggling to keep Intel relevant in the Internet Age, where the PC plays only a supporting role.

By Jay Greene, with Peter Coy and James E. Ellis in New York, Robert Berner in Chicago, and Cliff Edwards in San Mateo, Calif.

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