Change is hard to handle
Monday 5 December 2011
When it broke, news of Tom Glocer’s exit from Thomson Reuters was more sudden and sooner than expected. Despite rumblings, only three months ago he was sufficiently confident to say he wasn’t planning to go anywhere and intended to “stay for a good long time to fix and thrive under this business”. But Glocer’s survival was not in the script. In the end he was given a month to make his farewells, surrender his corporate credit cards and clear his desk. That’s more than at some corporations, where departures of senior executives can be brutally swift and ignominious. It had become apparent in recent months that James Smith, promoted to chief operating officer in late September, was being groomed to take over and that the denouement was only a matter of time. Glocer’s accelerated departure at year-end was said to be mutual. As well as giving up the CEO job he is making a clean break by resigning from the board of directors.
In addition to the change of command at the top, the group is being re-organised into five new business units in its third upheaval in five months. Investors were not impressed. In a flat market, TRI shares were marked down in New York and Toronto.
Mr Smith's promotion and Mr Glocer's removal complete the swallowing up by Thomson of Reuters
A mergers and acquisitions lawyer who joined Reuters 18 years ago as a deputy general counsel in New York, Glocer was the news organisation’s last senior executive left at Thomson Reuters.
“Mr Smith’s promotion and Mr Glocer’s removal complete the swallowing up by Thomson of Reuters,” The Independent pronounced.
With Glocer gone, the Thomsonisation of Reuters is now complete, one old hand in New York quipped.
Glocer is credited with rescuing Reuters a decade ago through a sweeping cost-cutting programme when the company’s performance and stock price faltered following the dotcom bust. More than 3,000 jobs were axed. He then engineered the $17 billion takeover of Reuters by Thomson and in the process scored the masterstroke of securing the top job of the combined company for himself. Thomson Corporation paid a 40 per cent premium to Reuters’ share price at the time. Reuters gained a bail-out; Thomson gained global recognition. As the Financial Times put it: “Headquartered in Toronto and with its West legal business in Eagan, Minnesota, Thomson punched below its weight outside North America. But by acquiring Reuters, with its global news brand, buildings in Canary Wharf and Times Square and a high-profile chief executive in Mr Glocer, ‘they flirted with having a personality’, one insider said.”
After the acquisition had been finalised, Glocer wrote gleefully on his personal blog: “I may have drunk the Kool-Aid, but it sure tastes good.”
Glocer’s ouster – for that is how it was portrayed by many media analysts and headline writers – demonstrated yet again the intolerance of Canada’s $20 billion net worth Thomson family of under-performance that impacts the bottom line. Its 55 per cent share of the $22 billion business has lost $5 billion in value. The markets division - essentially the old Reuters legacy business including the iconic but impecunious news wire - accounts for more than half the group’s revenue and has been the major under-performer. The banks that buy its financial data products have cut costs and retrenched some of the employees who use them.
Glocer had struggled to turn the business around in the face of strong headwinds from turbulent markets, swingeing cuts in bank headcounts and increasingly aggressive and more agile competitors like Bloomberg. He may have allowed himself a wry reflection that change and the uncertainty that comes with it are hard to handle, as he had told the group’s 55,000 staff only nine days previously. He acknowledged then that many people at the company were tired of organisational change and the rumour mill was hyperactive, but said the financial position of the business was rock-solid, the balance sheet strong and the credit rating excellent.
After a decade as chief executive, first of Reuters and then of Thomson Reuters, Glocer said he had recommended the promotion of his successor to the board. He pitched his leaving as retirement and told a small group of friends and former colleagues “I look forward to joining your ranks.”
On Twitter, he wrote wistfully: “Reuters News has over 1 million followers. I will always be proud to be one.”
Over his three years at the helm of the combined company Glocer earned more than $55 million. He is likely to walk away with at least $37.7 million in pay and shares. He holds $28.2 million in shares and options, according to company filings. He should also be entitled to compensation in lieu of his annual salary and short-term and long-term cash bonuses worth $9.5 million last year. A five-year long-term deferred share award that he received in 2008 when he oversaw the merger is set to vest. The windfall was worth $28 million but has vested in portions of 20 per cent each year since then.
At 52 and with a young family, it’s unlikely he will be content merely to spend more time with his money. Any executive with experience like his can expect to be presented with new challenges before long.
David Thomson, third Baron Thomson of Fleet and grandson of the family publishing empire’s founder Roy Thomson, is famously publicity shy. He cannot have been happy at all the adverse attention that has focused on the company and, by extension, on him as its chairman this year.
It has been an extraordinary year. From the sudden replacement of editor-in-chief David Schlesinger in February to the night of the long knives in July when six senior executives - including markets chief Devin Wenig, a Reuters protégé of Glocer who had been seen as a potential CEO successor - left abruptly, and now the replacement of the chief executive, it has been a year of turmoil and distraction.
For the chairman, “Tom will be remembered as the individual who turned around Reuters ten years ago, led the company to growth and guided its sale to form Thomson Reuters.”
The judgment of Michael Nelson, former Reuters general manager, is that “Tom Glocer will go down in history for negotiating the sale of Reuters to Thomson in 2007.”
His successor, also 52, is a former journalist who joined Thomson in 1987 and rose to run the company’s most successful operations. He has closer ties to the family. “Jim Smith will provide strong leadership for Thomson Reuters at this juncture. He has earned the respect and confidence of his colleagues and the board alike,” the chairman said, adding: “His instincts and his customer focus have been the basis of a remarkable career in our business.”
At this time of year it is customary for retrospection and reflection to give way to crystal ball gazing. After so much turbulence, what does the year ahead hold?
After the most recent quarterly results financial analysts were forecasting another year of transition followed by a more normalised year in 2013. Most lowered their targets for the stock.
Smith's first challenge is to show that the latest restructuring is working and that, nearly four years after the merger, the business can at last settle down. Integration must be shown to be a success. The company cannot afford the self-indulgent luxury of yet another re-organisation. His first message to the staff, on Friday, put the uncertainty in the past. It was “the beginning of the end of a turbulent period of executive change”.
Some Reuters veterans have been unnerved by the elevation of Smith and other former Thomson executives, insiders told the Financial Times. On the editorial side, journalists will be looking for evidence that the influx of high-profile writers, columnists and editors will not limit opportunities for career advancement.
In the wider company, can Thomson Reuters get a grip on its billion-dollar desktop data product Eikon, which got a shaky start in September last year and failed to set the market alight? It seems to have been brought to market prematurely. Glocer acknowledged that its launch was overly ambitious. Will it need the fresh impetus of a re-launch?
For retired staff of Reuters, 2012 will be the year when members of Reuters Pension Fund and Supplementary Pension Scheme learn whether the cut of one-fifth in the value of their pensions will be halted and discretionary increases, paid in only three of the last nine years, resume.
The Baron, meanwhile, goes from strength to strength. This website’s monthly pageviews numbered 10,449 in January, steadily increasing to 22,342 in November with a 31,774 spike in April (when two veteran journalists were punished for an online indiscretion) and an average for the 11 months of 21,019. It has become the prime independent source of information about Reuters and its people past and present, demonstrated as recently as the day after news of the changing of the guard was announced when 2,728 pageviews were registered in 24 hours.
The editor wishes all readers a joyful festive season and a happy and more tranquil new year. ■