Six CEOs

Local executives describe corporate life in a post-​Enron economy
Rate this item
(0 votes)

Enron’s spectacular collapse in 2001, followed by WorldCom’s demise after Bernie Ebbers enjoyed more than $400 million in loans approved by his board of directors, led to the passage of the Sarbanes-​Oxley Act of 2002 (SOX). SOX was intended to change the behavior and accountability of publicly traded companies, CEOs, boards of directors and public accounting firms


But five years later, as the downfall of Bear Stearns plays out, have things really changed that much in the way CEOs run their companies?

To find out, we interviewed a group of six Pittsburgh-​area CEOs. Each has been very successful in running a company despite strong competition in the post-​Enron era.

For example, when Chuck Bunch became CEO at PPG Industries, it had about $9 billion in annual sales, and this year sales are expected to exceed $15 billion. Sales have increased by more than 80 percent and injury rates have dropped the same amount during John Surma’s tenure as U. S. Steel CEO. While CEO at Equitable Resources, Murry Gerber has increased the market cap of the company tenfold. Respironics passed the $1 billion sales threshold for the first time under John L. Miclot, and was sold earlier this year to Dutch giant Phillips for around $5 billion. Walter W. Turner drove growth at Koppers and took the company public onthe New York Stock Exchange in 2006. Morgan O’Brien so improved operations and cash flow at Duquesne Light that six outside investors bought the company in 2007.

These six discussed how they position their diverse businesses to succeed in a floundering national economy and how they manage in a post-​Enron world. They also touched on how they escape, at least for a little while, the pressures of running global companies with thousands of employees.

For example, Surma, a McKees Rocks native, plays competitive ice hockey several times a week at 6 a.m. In his corner office on the 61st floor of the U.S. Steel Tower isa photo of him skating in a game involving the Slovak and Czech national teams.Turner retreats to his Washington County farm where he operates heavy equipment and does manual labor to clear his mind. For Miclot, relaxation is a long run each day, no matter where he finds himself. And O’Brien has a standing tee time every Sunday morning with his three sons.

Did SOX shake them up?

Congress intended SOX to shake up corporate America so that Enron– and WorldCom-​type debacles would neverhappen again. Yet, five years after SOX became embedded in corporate culture, none of the CEOs interviewed felt it had fundamentally changed how their companies do business.

SOX requires the CEO and the chief financial officer (CFO) to sign off on key reports that reflect anything happening within their companies. Excuses such as “I didn’t know what was going on” or “I didn’t understand that arcane accounting issue” are not supposed to fly anymore. While all six CEOs agree that internal and external compliance costs are higher now than before SOX, their basic corporate policies have not significantly changed.

Surma will tell you he and CFO Gretchen Haggerty always did and always will sign off on what is going on at U.S. Steel, no matter what SOX mandates. He feels that’s what every CEO should do. He constantly referred to the Code of Conduct, which applies to everyone throughout company in the U.S. and around the world. This code had its roots more than 100 years ago with Judge Elbert Gary, USS’s first chairman of the board.

Bunch, who is also chairman at PPG, points to the company’s “Global Code of Ethics” booklet, which every employee gets, as proof of how crucial ethics are in his company. He personally leads PPG’s Corporate Ethics Committee, which is charged with reviewing ethics-​related complaints, anonymous or otherwise. He said the PPG code of ethics has been evolving over the last 25 years and that SOX has had little impact on its mandates. According to Bunch, there is “zero tolerance” for ethical violations at PPG.

Following a similar model of leadership, Equitable’s Gerber said, “I don’t mind taking risks, but I will not tolerate someone doing anything here that hurts either us or those on the outside. Ethics is not viewed as an option here.” O’Brien and Miclot both said SOX has had no impact on how ethical issues are addressed. In short, while not having a direct impact on ethical standards, SOX seems to have given ethical conduct a higher profile in these six companies, and the CEOs seem to like that.

Are they really independent?

A key SOX provision targets public company directors. Congress intended to force stricter oversight from boards of directors, preventing CEOs from acting like cowboys in the Wild West. In that regard, each company interviewed has a majority of outside, independent directors —meaning they are neither company employees nor significant shareholders. It’s a stark contrast to the long-​held tradition of many boards to include friends, golfing buddies and “co-​CEOs” whose informal motto may have been “go along and get along.” This exclusive and highly paid club of mostly white, upper-​middle class executives began to change in the 1980s.

At PPG, Bunch is the only one of the 10 directors who is not independent of the company. Four of those 10 hold technical doctorate degrees, which Bunch finds valuable when dealing with technical issues and decisions at the board level. Gerry McGinnis, who created a billion dollar global company in Respironics, always served on its board but insisted on having independent directors even before Respironics went public. Thus, Miclot is the CEO of Respironics but does not serve as chairman of the board. Likewise at Koppers, Walt Turner is CEO, but someone else is Chairman. And before Duquesne Light became a privately owned company last year, Morgan O’Brien was CEO but not chairman of the board.

Some critics argue that the CEO and the chairman of publicly held companies should not be the same person. Equitable’s Gerber disagrees, believing that, in order to effectively manage a large, complex organization, the chairman needs an intimate, day-​to-​day knowledge of a company’s strengths and weaknesses. Surma, whose company has $17 billion in sales, agrees with Gerber. In companies in which the CEO also acts as the chairman (Equitable, PPG, and USS), an independent board member always serves as the “leading outside director.” During board meetings, the independent directors at some point go into separate sessions without the CEO present so they can talk openly abouttopics such as CEO compensation and the company direction under his leadership.These independent directors also control the compensation and audit committees of public companies — another check on the power of the CEO mandated by SOX.

Vision and challenge

Every CEO must meet or exceed his company’s quarterly and annual economic projections on Wall Street. If not, his term will be short. Currently, the average CEO of a U.S. public company holds his position 7.8 years.

Each CEO interviewed expressed a different vision for his company’s future.Miclot focuses most on recognizing and using the special talents of each employee. His mission has been to help his organization create technologies that help save lives. While for the last eight years, Respironics has met or exceeded Wall Street projections, Miclot doesn’t stray from his core mission: “We have a higher purpose — to help critically ill people.” He dislikes “disablers” — employees who simply want to stay with the status quo and find risk-​taking threatening.

Gerber aggressively pushes Equitable employees to grow the company. “We need to take risks,” he insists. When Gerber came to Pittsburgh in 1998, he says Equitable was a sleepy energy company with a market cap of about $600 million. Ten years later, it’s worth about $7.5 billion and this year will spend more than twice its 1998 market cap on a wide-​ranging capital improvementprogram. “Putting in a pipeline is always risky, but you can’t shy away from the challenge,” he said. “The communities we serve need the natural gas we supply.”

Turner’s greatest challenge as CEOof Koppers is running a traditional industrial company in a highly regulated environment. He makes sure employees possess a sense of urgency to improve the company and their own performance. “Our people must take personal responsibility for their deeds,” he said. Particularly inenvironmental compliance and worker safety, Koppers strives to exceed global standards and regulations, and Turner expects senior managers to travel overseas often to keep in touch with world operations.

Two non-​economic issues drive U.S. Steel’s Surma. Worker safety is number one. He accepts nothing less than a 100 percent worker-​safety record. In the U.S., in Slovakia and in Serbia, where USS has major facilities, he has a “no excuses” safety policy and claims to be “viciously uncompromising” when it comes to ethical conduct. A decade ago, USS was primarily a domestic American company; now 40 percent of its activities are international, and that percentage is growing. While ethics can be a challenge for companies doing business outside the U.S., USS still maintains one code of conduct which applies to its employees and suppliers.

PPG’s Bunch is proud that his company is pushing the boundaries of technology, removing heavy metals from its processes, developing a range of environmentally friendly products and promoting energy conservation throughout its operations.

O’Brien’s challenge differs from the other five. His world is the 800 square miles that make up Allegheny and Beaver counties, and the success or failure of Duquesne Light depends on the economic health of this region. The son of an Irish immigrant whose father’s proudest day was when O’Brien was named CEO, he meets regularly with the rank and file and tells his 1,300 employees that Duquesne Lightmust do “whatever it takes” to make its customers happy. Now that Duquesne Light is owned by six major institutional investors, he says, “My goal is to show and tell my board members everything. There are no surprises.”

How they lend a hand

Each of the CEOs volunteers time and resources to civic and nonprofit organizations such as the Allegheny Conference on Community Development, the United Way, the Pittsburgh Symphony and a diverse group of social-​service and healthcare charities. Perhaps less expected is that each also extends his philanthropy to the regions and countries where the company does business.

A prime example is U.S. Steel, nowthe largest foreign investor in Serbia with its Smederevo plant, which employs thousands. Upon learning several years ago that the only hospital in Smederevo was short on resources, Surma and USS Chief Operating Officer John Goodish organized a reception at The Duquesne Club for company suppliers, Pittsburghers of Serbian descent and others. Special guests were Prince Alexander, grandson of the former king of Yugoslavia, and his wife Princess Katherine. The prince, now living in Serbia, spoke of needed hospital improvements, and while it was not revealed how much was raised that evening, the hospital in Smederevo is a far more modern facility today.


Dennis Unkovic

Dennis is a partner with the law firm Meyer, Unkovic & Scott LLP, where he provides advice to companies doing business around the world. He has written four books, including his Trade Secrets Handbook, which was published in English, Japanese, Chinese and Serbo-​Croatian. Prior to joining the law firm, he was legislative director for U.S. Sen. Hugh Scott.

Explore Related Stories:

Close Window Welcome to Pittsburgh Quarterly
Keep up with the latest

Sign up for our Newsletter, Pittsburgh Quarterly This Week.

We’ll keep in touch, but only when we think there’s something worth sharing. To receive exclusive Pittsburgh Quarterly news and stories, please fill out the form below. Be sure to check your email for a link to confirm your subscription!

View past newsletters here.

Don’t miss a story! Sign up for our newsletter to receive award-​winning journalism in your inbox.

Please let us know your name.
Invalid Input
Please let us know your email address.
Invalid Input