Trend: CFO to CEO

Increasingly companies are hiring CFOs as chief executives; Kmart the latest. Plus: Two former Enron directors testify about Lay, Andersen sued (again), and GE to borrow $60 billion.

Another former finance exec has snared the top spot at a major corporation.

Kmart Corp., slated to emerge from bankruptcy around April 30, surprisingly tapped president Julian Day as its new CEO. Day succeeds James Adamson, who will continue to serve as chairman through the final stages of the company’s reorganization.

Day, who joined Kmart as president and chief operating officer in March 2002, reportedly played a key role in developing Kmart’s five-year business plan. That plan was approved by the company’s board last week.

Prior to that, Day moved up the ladder through the retailing industry, mostly as a finance executive.

He spent four years with Sears, beginning in March 1999 as executive vice president and CFO before being promoted to chief operating officer.

Before joining Sears, Day served as CFO at Safeway Inc., the second-largest food and drug retailer in North America.

Adamson was initially appointed as a nonexecutive chairman in early 2002 after the company disclosed its dire financial situation. He became CEO in March 2002.

He then recruited Day as president and COO.

Kmart indicated that the timing of Day’s appointment was designed to provide him with enough time to choose his management team—including a permanent finance team. Since March 2002, turnaround specialist AlixPartners has been overseeing the finance function at Kmart.

Kmart’s promotion of Day appears to be part of a hiring trend. As recently reported, boards of directors are increasingly turning to finance veterans to head up their companies in this accounting-conscious world ( see “Now Playing: CFO as CEO”).

Earlier this month, StorageNetworks Inc., a storage-management software and services vendor, named chief financial officer Paul Flanagan as the company’s new chief executive officer and president. The day before, Argosy Gaming Co. had tapped president Richard Glasier—a onetime CFO for Royal Caribbean Cruises Ltd.—as its new CEO.

And BHP Billiton, the world’s largest diversified resources company, announced that its former CFO Chip Goodyear would take over as chief executive officer.

Two Former Enron Directors Testify

A Houston grand jury is apparently putting the squeeze on former Enron Corp. chairman Ken Lay.

Two directors who left Enron’s board last February were recently called to testify about Lay, according to the Houston Chronicle.

The attendees: Charles LeMaistre, the retired head of University of Texas M.D. Anderson Cancer Center, who ran the board’s compensation committee; and John Duncan, a former executive with Gulf & Western Industries, who also served on Enron’s compensation committee.

The two men were called as information witnesses and are not targets themselves, said the paper, citing sources.

The grand jury has apparently been probing stock trades made by Lay, as well as loans extended to the former chairman by Enron.

The jury is also investigating Enron’s broadband division to determine whether its financial and technological performance was misrepresented by company officers, including former CEO Jeff Skilling, the Chronicle added.


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