With a Push-out Score of 5, the CEO departure at Owens Corning is in the middle of the scale and seems two-edged.
As announced on January 3, 2019, Michael H. (Mike) Thaman “has decided to retire” from his role as CEO as of the day of the company’s annual meeting of stockholders, currently scheduled for April 18, 2019. He will hand over the reins to Brian D. Chambers, currently chief operating officer of Owens Corning.
At first glance, many criteria point to a voluntary change. The lead time of 105 days is immaculate. Thaman’s tenure of approximately 11 years as CEO is impeccable. The outgoing CEO will remain with the insulation and roofing company in the role of executive chairman, and the fact that the CEO post is filled internally implies continuity.
On closer examination, the planned CEO change raises a lot of questions.
At the age of 54 (as at the time the company filed its latest proxy statement), Thaman seems quite young to retire from the CEO post. That’s the first point for the Push-out Score.
The management change announcement follows a decline in Owens Corning’s share price of 55 percent since January 2018. Point number 2.
Thaman steps aside at a critical time. Point number 3. On October 24, 2018, Owens Corning came out with quarterly earnings of $1.54 per share, missing the Zacks consensus estimate of $1.71 per share. Owens Corning grapples with higher raw material and transportation costs.
The form and language of the announcement provide points number 4 and 5.
In the announcement from the Toledo, Ohio-based Owens Corning, Thaman receives praise and thanks, but no accolades for concrete and quantified successes.
Thaman says: “Having served 11 years as CEO and nearly two decades in executive leadership, I feel this is the right time for a leadership change.” It almost sounds like he’s tired of office.
Thaman’s successor was promoted to the newly created post of COO in August 2018, less than half a year ago. At the age of 52, the incoming CEO is not much younger than the outgoing CEO.
John Williams, lead independent director, stated that the management change announcement “is the successful culmination of a multiyear succession plan to select the best leader for the company.” His statement can be understood as if the board no longer considers the sitting CEO to be the best leader.
Conclusion: low age, poor stock price performance, critical time, formal anomalies and linguistic peculiarities in the announcement are five red flags. The Push-out Score of 5 suggests that Thaman may have decided to leave the CEO post after some subtle encouragement.
On the other hand, correlation does not imply causation. It cannot be completely ruled out that Thaman decided to retire from his CEO post entirely on his own initiative at a relatively young age and that the correlation between his move and the recent extremely weak share price performance and the recent disappointing earnings development is purely coincidental and not causal. However, if Thaman’s intention was to catch the optimal time to resign, he obviously did not achieve that goal.
Owens Corning did not respond to a message seeking comment.