What next for Telecom's troubled CEO?

Experts say Theresa Gattung's next job could be abroad if she resigns. Picture / Martin Sykes

After a long and successful run, a cloud now hangs over Telecom CEO Theresa Gattung.

Dr Roderick Deane has already gone. He resigned as chairman of the Telecom board last month following the Government's decision to unbundle the local loop.

Whether Gattung leaves or not is up to her and the Telecom board. But the possibility raises some interesting questions.

How does a high-profile CEO go about exiting an organisation with such a high profile?

How does a CEO negotiate a 'golden handshake' as part of an agreement to go quietly? And what next for a CEO as accomplished as Gattung; is an overseas position likely to offer more challenge than a role in another New Zealand organisation?

Peter Ross, who specialises in chief executive and non-executive director appointments for Sheffield Consulting, says if Gattung exits Telecom she could easily pick up a non-executive directorship or another CEO role in New Zealand or offshore.

"Theresa [Gattung] would be an interesting candidate for a private equity firm moving into the telecommunications space once any restraints of trade [clauses] were removed. She would also have a huge crack at landing a non-executive director role because there is a demand for top-class businesswomen in the non-executive director ranks," says Ross.

Ross says there is typically a lot of "smoke and mirrors" around the exit of a high profile CEO and many who appear to leave voluntarily usually do so after reaching a private agreement with a board that wants them to go. If CEO performance is not reason for the 'push', Ross says old patterns and ways of working can be.

"It's quite common for a new CEO to come in and make changes and then get weathered to those changes. In a monopoly, a CEO will also typically milk the cow as long as possible and defend and protect that cow for as long as they can. Boards can then decide to invest in someone who doesn't have a vested interest in that past," says Ross.

Nicola Pohlen, managing director for executive recruitment consultancy Pohlen Kean, says CEOs can be gently pushed out by boards for a variety of non-performance related reasons.

"There can be lack of alignment in strategic direction or a personality clash; the business might be performing poorly, the board might be meddling, or the CEO's face just doesn't fit [anymore]," says Pohlen.

She says CEOs who are not pushed may leave for bigger and better roles, international opportunities, or simply because they're ready for a change.

Larry Small, director for consulting firm Executive Appointments, says while it's a good idea for a CEO to move of their own volition before they are pushed, if the business is still on a steady course then CEOs such as Gattung may push through any political difficulties and triumph.

"At the moment she is putting on a brave face and saying 'I will fix any problems and I will see this thing through' like the driven and highly focused CEO she is," says Small.

That said, Pohlen believes at some point a good CEO will realise there has been a "disconnect" with the desires of the board and will begin to plan an exit strategy. A good exit may involve the CEO helping the board to identify successors, or assisting the board in a smooth departure designed to lessen the impact on the business, the stock exchange and its public profile.

"If Theresa leaves Telecom she needs to do it in her way and through her own agenda and with grace. Taking advice on how to deal with the media is also a good idea," says Pohlen.

Small says if Gattung did want to exit Telecom, she would need to "play with a straight bat" so the board was aware of her intentions and was seen to be taking the initiative.

"Then when the day comes, she can say, 'Here is my legal position, now what recompense is there for me?'. She would also need an assurance from the board that she would be supported because any new employer will refer to that board," says Small.

Ross says it would be in Gattung's interests "not to leave Telecom messily" and is always in the mutual interests of both board and CEO to negotiate a dignified exit. In a public and visible disagreement, a CEO can be maligned and can be viewed as 'damaged goods' by potential new employers. But a publicly listed or high profile company may also have its reputation and share price damaged by a public spat with a departing CEO.

"This is where the golden handshake comes in; you buy complicity for an exit to take place with dignity," says Ross.

The consultants say a golden handshake is usually negotiated through lawyers on each side and 'softer versions' of the golden handshake are made to departing middle level managers in the form of career transition consulting or counselling. For the CEO however, it really is a payment for going quietly.

"The CEO says 'yes, I am prepared to go but I expect compensation in the form of a lump sum or six months' salary'," says Small. He says while emotions can run high, if a CEO has a good relationship with their board a golden handshake can occur in a dignified fashion.

"Nowadays there is an expectation that CEOs are brought in to have a certain influence or achieve an objective within a timeframe and when that has been achieved, it is time to move on. They will know full well that the new broom is going to come through," says Small.

Ross says a year's salary should be a maximum amount for a golden handshake but share deals can form part of the agreement and in the case of private organisations a lot of what is paid is not known.

"Sometimes the tax on a golden handshake can be quite big, so to ensure the CEO gets a good net payout the whole amount is bumped up. Boards might also pay out progressively over two years so the CEO is taxed over two years," says Ross.

So if Gattung was to leave Telecom in a dignified fashion with a golden handshake of a year's salary (around $3 million); then what? Small says someone such as Gattung is likely to leave with her reputation preserved and the kudos of having successfully managed a company in a visible position.

"She could take time out to explore her options through search consultants and career transition specialists or, because she is so high profile, there could be a year where she steps back and consults," says Small. He says the idea is for a CEO to maximise any positives.

Ross says the debate for career CEOs is always 'do I have another CEO role in me?'

"Often an assumption is made that because someone has been [high profile] they won't be interested in smaller operations. But often they are. If Gattung wanted to head up another big corporate, she would need to go offshore; but people shouldn't assume she would want that."

Pohlen says any decent recruitment consultant would just invite Gattung to a meeting and ask her what she wanted to do before attempting to work on her behalf.

"After all, she might not want to be a CEO any more; she might just want to retire and grow olives."