ROCK CENTER FOR CORPORATE GOVERNANCE

CASE: CG-15
DATE: 04/10/09

SELECTING A CEO: THE LEADER, THE BUSINESS BUILDER,

OR THE TECHNOLOGIST

PROLOGUE

GDF Corp was a leader in the telecommunications industry, offering network equipment and
enterprise solutions to a broad range of customers around the world. Customers included
telephone service providers, cable companies, Internet service providers, military organizations,
and other government agencies. GDF was known throughout the world for the technological
sophistication and quality of its products, as well as for the excellence of its research and
development team. As a multinational corporation, GDF faced fierce competition from
European, North American, and Asian telecommunication equipment providers. The company
was headquartered outside of the United States and had a strong national identity.

In many ways, the story of GDF was typical of the broad telecommunications industry. In the
late 1990s, the company expanded rapidly, due largely to technological innovations and
explosive global demand for network equipment. In order to remain competitive, GDF
supplemented its internal research and development efforts with the acquisition of small
companies in specialized niches of the telecommunications industry. GDF funded these
acquisitions through the issuance of new shares. Revenues, profits, and the companys share
price all surged.

In 2000 and 2001, suddenly and unexpectedly to senior company executives, the company faced
a sharp reversal of fortune as the entire industry went into severe retraction. Demand for GDFs
products, which had been robust just a few years before, dried up, and the companys once-rich
operating margins turned quickly into losses. The companys cash position deteriorated, and
GDF faced the very real possibility of bankruptcy. To maintain financial solvency, the company
was forced to undergo a broad restructuring, including the layoff of thousands of employees.
Professor David F. Larcker and Brian Tayan prepared this case as the basis for class discussion rather than to
illustrate either effective or ineffective handling of an administrative situation. The Rock Center for Corporate
Governance is a joint initiative between the Stanford Graduate School of Business and the Stanford Law School.

Copyright 2009 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To order
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Selecting a CEO: The Leader, the Business Builder, or the Technologist CG-15 p. 2

Adding to the companys problems was the revelation that GDF had used aggressive accounting
practices to inflate its results. The companys stock, which had traded as high as $100 per share
(on a dollar-equivalent basis), fell to under $5 by the end of 2001.

In 2002, the company announced that it was replacing its larger-than-life chief executive officer,
Max Grosser, with Justin Goodrich. Goodrich had served as chief operating officer of the
company and was known for his financial acumen and high personal integrity. In making the
appointment, the board of directors hoped that Goodrich would be able to successfully navigate a
financial turnaround, improve the companys internal financial controls, and restore its public
reputation and credibility with the investor community.

During the next two years, Goodrich moved quickly to reduce the companys cost structure. In
particular, he focused on streamlining GDFs research and development process, consolidating
production facilities, and reducing overhead. He also divested non-core businesses, reversing the
buildup that occurred under Grosser.

At first, Goodrichs efforts appeared to pay off. Although revenues decreased due to a prolonged
industry slowdown, the company was able to achieve positivethough slimoperating margins.
Net income continued to be weighed down by restructuring charges and asset write-downs, but
GDFs interest coverage improved as Goodrich aggressively paid down debt. The price of the
companys stock drifted up to the high single-digits per share (see Exhibit 1 for historical
financial information).

By late 2008, however, the companys turnaround stalled. Goodrich had stabilized GDFs
market position, but the company was still operating far below the level envisioned by the board
of directors and institutional investors. Several board members began to worry that Goodrich
had not set a clear technological and strategic course for the company. Through internal surveys,
the board discovered that employees, particularly those in research and development, were
beginning to lose confidence in Goodrichs leadership. Also, the board felt that Goodrich, as a
financial operator, was not spending enough time face-to-face with key customers. As a result,
in 2003, the board of directors decided to initiate a thorough search process to replace Goodrich
as chief executive officer of the company. The board would hire an independent search
consultant to look both inside and outside the company to find the individual best qualified to run
GDF over the next five to seven years.

THE CEO SEARCH

GDF Corp did not have a formal succession plan in place at the time it decided to replace
Goodrich. As a first step, Ricardo Guzman, chairman of the board, convened a search committee
which would be responsible for hiring an independent search consultant and for overseeing the
recruitment process. Guzman, who had a background in electronics and manufacturing, would
serve as the head of the committee. In addition to Guzman, three members of the nominating
and governance committee agreed to serve on the search committee: Maury Gelt (bank
executive), James Lindsay (technology), and Roland Cathcart (logistics and transportation). All
four men were independent, non-executive directors.
Selecting a CEO: The Leader, the Business Builder, or the Technologist CG-15 p. 3

Guzman recommended that the committee retain Diana Hunt of DH Associates to manage the
search process. He had experience working with Hunt on a previous search and was pleased
with the quality of candidates she brought him and, in particular, with the quality of the
individual his company ultimately hired. Hunt agreed to perform the GDF search on her
companys standard terms: a fixed fee of $1.5 million plus expenses. Guzman felt that the fee
was fair, as other search consultants charged one-third of first-year expected cash payments
(salary plus target bonus), which could amount to $4 million.

As a first step, Hunt engaged in one-on-one discussions with several key executives at GDF.
These sessions allowed her to become intimately familiar with the requirements for a successful
candidate and to better understand the strategic objectives of the company. Hunt used this
information to draft a position specification document that outlined a description of the
company, the responsibilities of the CEO position, and the professional and personal
qualifications expected in the ideal candidate. She shared this document with qualified
individuals after discussing the opportunity with them in detail. (See Exhibit 2 for the position
specification document and Exhibit 3 for the profile of the ideal candidate.)

The next step was to develop a comprehensive list of individuals with the required experience
and proven track record to serve as the CEO of GDF. The philosophy of DH Associates, based
on its years of experience, was that a persons past performance was the most reliable indicator
of what that individual was likely to achieve in the future. If an individual had been an effective
thinker, performer or leader, that individual would likely bring those same qualities to its
subsequent employment. For the GDF search, Hunt was looking for an individual who had a
history of successfully managing technology and complex organizations.

In compiling the target list, Hunt interviewed an exhaustive set of professional contacts that she
has built up over the years, as well as each member of the board, to identify specific individuals
to be included in the search. Prospects came both from within the company and externally.
Hunt looked for individuals with related industry experience, including GDFs competitors,
corporate customers, and supplier organizations. She also looked for those with general
management expertise. The board of directors urged that, if possible, individuals who were
nationals of GDFs home country should be given added consideration.

Based on these inquiries, Hunt developed a list of candidates. It included one current GDF
executive, two former GDF executives, as well as executives from telecommunication equipment
providers, telecommunication service operators, and with strong general management
experience. Three of these individuals were nationals of GDFs home country (see Exhibit 4 for
the candidate list).

After finalizing the list, Hunt contacted each individual to discuss the opportunity and gauge
their interest. Hunts approach was not to divulge the companys identity until she had
confirmed both the candidates qualifications and interest in pursuing the position. After her
initial conversations, seven candidates declined to continue. Some of these worked at
competitors of GDF and declined out of a deep sense of loyalty to their organizations: loyalties
both to their companies home countries and to the technology standards that they believed were
Selecting a CEO: The Leader, the Business Builder, or the Technologist CG-15 p. 4

superior to those of GDF. Others who declined did so for personal reasons or from a feeling that
GDF would not make a good fit for them.

Having reduced the list to 29 potential candidates, Hunt eliminated an additional 15 that she felt,
for some reason or another, did not meet the qualifications of the ideal candidate. As a result,
she had narrowed the list down to 14 viable candidates. Among these were three whom she
recommended to the search committee as the most qualified finalists, standing head-and-
shoulders above the rest.

Craig Jensen

Craig Jensen was born in Europe but moved with his family to the United States in 1970. He
attended the University of Michigan from 1971 to 1975, earning a bachelors degree in
mathematics. While in college, he played on the rugby team and was granted a partial athletic
scholarship. After graduation, Jensen took his first job with GC, joining as a corporate auditor.
The corporate auditor function at GC was quite prestigious, in that Jensen and his team were
required to perform financial and strategic reviews of many of the top businesses within the
company. Through these reviews, Jensen came to know the intimate details of many of GCs
inner workings. Furthermore, as corporate auditor, he was asked to make recommendations on
how to improve these businesses, whether it was through a revamp of the supply chain, a
reduction of the cost structure, a shift in business focus to improve revenues and market share, or
a realignment of organizational work processes.

Jensen was very successful in this position and two years later moved to one of GCs fastest-
growing subsidiaries, GC Capital. He remained at GC Capital for the next 15 years, and during
this time period was given a wide range of responsibilities. He was asked to improve the
profitability of asset portfolios. He was also asked to turn around struggling operations. His
assignments were both in the United States and in Europe, and for some period of time, he and
his family had to relocate to Europe.

At each stage of the game, Jensen showed an ability to isolate the problem, implement a plan or
strategy, and then execute with success. For example, in 1992, he was asked to turn around GC
Capitals truck leasing operation in Europe. He learned quickly that problems existed throughout
the operation: financial discipline was weak, the operations balance sheet was highly leveraged,
and morale and productivity were low. As a first step, he oversaw a comprehensive review of
the strategy and management personnel. Within six months, he set a new strategy, reduced the
cost structure, and added a rigorous but streamlined set of financial controls. He also removed
over 1,000 low-producing employees from the organization and replaced 90 percent of top
management. The division ultimately grew market share and profitability, despite a tough
industry environment. Importantly, the new team had a mindset that it could succeed.

In 1996, Jensen left GC Capital and took a senior position in one of GCs businesses, relocating
to Asia. The situation was one that Jensen had been asked to fix before: operating margins
below industry average, slowing revenue growth, and unacceptably low market share. Over the
next two years, Jensen was able to increase inventory turns, improve volume, decrease unit
prices, and reduce the businesss cost base. He also removed approximately 700 low-performing
employees and replaced them with 500 high-performing employees. The success earned him
Selecting a CEO: The Leader, the Business Builder, or the Technologist CG-15 p. 5

another promotion, this time to president of that divisions global operations. For the first time,
he reported directly to the CEO of GC. Jensen continued with his operational success. As
president, he spent more than half of his time developing leadership talent, but he also earned the
reputation for being an individual who could develop effective teams.

In 2000, Jensen was approached by corporate recruiters who persuaded him to leave GC to
become the president and chief operating officer of CompTel. CompTel was a world famous
telecommunications company, with both consumer and commercial businesses. Over the
previous few years, CompTel had been losing market share in several key businesses. For
example, in one division, operating expenses were as much as 20 percent higher than those of
CompTels competitors. Much of this cost disadvantage was due to the fact that Jensens
predecessor had made a huge bet to increase production capacity right before a cyclical
downturn. To improve competitive positioning, Jensen and his team concentrated their efforts
on building revenue growth, reducing operating expenditures, eliminating production quality
issues, investing in research and development, and improving customer relations.

Jensen replicated this approach across all of CompTels six divisions, asking his management to
accelerate growth and reduce costs. The results were very positive. Under Jensens watch as
chief operating officer, CompTel posted earnings in 2003 that were the highest in corporate
history. Sales and margins improved in all businesses and all geographic locations. Operating
margins improved by over 12 percentage points in just three years.

In late 2003, the chief executive officer of CompTel retired. The company replaced him with a
new CEO from outside the company. Jensen felt slighted, believing that he should have been
selected for the position. In his opinion, he had accomplished an enormous amount through his
leadership and through the creation of a culture of accountability. Internal politics at the board
level, however, kept him out of the job. He advised the board of directors that the company did
not need both a CEO and COO and that he would resign (see Exhibit 5 for Hunts analysis and
appraisal of Jensens qualifications).

Jensen had signed a two-year non-compete agreement with CompTel upon his resignation from
the firm. The agreement gave the company the right to claw back $11 million of the $17 million
that was paid to him when he left if he took a job with an industry competitor. The agreement
also gave CompTel the right to reclaim profits earned through option exercises, which amounted
to another $11 million. As CompTel and GDF competed in a few business subsidiaries (15
percent overlap), GDF faced the risk that the non-compete might be triggered if it ultimately
hired Jensen. Jensen believed that the payment could be negotiated down from a strict non-
compete agreement to a non-solicitation agreement.1 However, he would expect to be made
whole on any money that he was forced to forfeit as a violation of the agreement.

1
Under a non-compete agreement, Jensen was not allowed to take employment with a firm that competed with his
former employer. Under a non-solicitation agreement, he was not allowed to solicit employees of his former
employer with the intention of hiring them (although they could contact him); he was also not allowed to directly
participate in the solicitation of business from customers of his former employer (although members of his team
were allowed to do so). See: QuickMBA, Employment Law and Duties to Ones Former Employer,
http://www.quickmba.com/law/empl/ (April 15, 2008).
Selecting a CEO: The Leader, the Business Builder, or the Technologist CG-15 p. 6

Frank Richardson

Frank Richardson was born in Pennsylvania but moved with his family to New England where
his father purchased a heating and air conditioning business. He attended Hamilton College
from 1970 to 1975, earning both a bachelors and masters degree in history. In 1977, he
returned to school and earned an MBA from a prominent U.S. business school. Upon graduating
from business school, Richardson joined a small electronics wholesaler based in California.

When the company was sold in 1984, Richardson took a position at a large technology company,
where he oversaw production in one of their electronics subsidiaries. He stayed there for two
years and was then lured away by a small California company called Technology Works.
Technology Works was a niche supplier of electronics components and Richardson came to
know the company well through his previous job. Richardson was hired to be the companys
vice president of manufacturing. During the two years that he served at Technology Works, the
company grew from revenues of $15 million and a net loss of $3 million to revenues of $22
million and a profit of $4 million. Richardsons manufacturing improvements were largely
responsible for the sharp increase in profitability. In 1988, the companys founders sold the firm
to a larger regional company, and Richardson made his first significant financial gain. He had
also established a reputation in Silicon Valley as a solid operator.

In the meantime, Richardson was asked by venture capitalists to join the board of the privately
held Contract Builder Company. Contract Builder was a middle-tier contract manufacturing
company, lacking the size, scale, and expertise to win contracts with major international
companies. The companys balance sheet was also highly leveraged. The companys investors
hoped that Richardsons expertise would provide guidance to management on how to improve.

Despite the companys shortcomings, Richardson recognized that it presented a long-term

opportunity. Most electronics and technology companies had poor manufacturing capabilities,
because the CEOs of those companies had technical rather than manufacturing backgrounds.
The CEOs rarely visited the production plants. As a result, manufacturing processes did not
receive the attention they needed, and the necessary talent to drive improvement was seldom
available. For this reason, any outside firm that could provide manufacturing services on a
contract basis was in a favorable position to deliver value to these companies and at the same
time profit greatly.

After a year on the board, the investors in Contract Builder were impressed with Richardsons
combination of technical and managerial knowledge and asked him to become CEO of the
company. They offered him a 5 percent equity stake as added incentive to grow the firm. Over
the next 14 years, Richardson did just that and on a scale that original investors barely imagined
possible. Under Richardsons leadership, the company made a series of bold moves that
eventually catapulted Contract Builder from a $50 million contract company primarily located in
the U.S. to one with revenues of over $10 billion and operations in dozens of countries in North
America, Europe, and Asia.

Immediately upon taking the helm of the company, Richardson focused on its financial
condition. He recognized that a weak balance sheet impeded the companys ability to grow. He
reduced overhead and made the decision to raise capital by taking the firm public. Proceeds
Selecting a CEO: The Leader, the Business Builder, or the Technologist CG-15 p. 7

from the offering were used to repay debt and to invest in manufacturing capacity. Richardson
also extended the companys capabilities by executing a series of acquisitions, all the while
careful that each one added to or complemented Contract Builders existing operations. In some
cases, he acquired competitors who were at one point larger than his own company.

Richardson also embarked on an aggressive mission to gain prominent, international clients.

Richardson calculated that once he got in the door with large companies, he could demonstrate
Contract Builders value proposition first hand and deepen his relationship with those customers.
One early success was an agreement to provide manufacturing services for a major European
telecommunications company, which gave Contract Builder high visibility on that continent.
Throughout the 1990s, Richardson demonstrated an ability to win business, signing contracts
with many of the worlds largest electronics, telecommunications, and computing corporations.

When the technology downturn hit in 2000 and 2001, Richardson recognized that it had the
potential to seriously impact Contract Builders business. He reacted quickly to limit any fallout,
announcing the closure of over 100 factories around the world and taking $1.5 billion in write-
offs. He and his team also used the opportunity to redesign the companys supply chain,
conceiving of vertically integrated manufacturing malls, in which Contract Builder factories
were located adjacent to those of its key suppliers. Such a move allowed for improved
coordination on inventory and production and a reduction in transportation costs. These
integrated manufacturing malls were established in both Asia and Europe.

By 2002, Contract Builder was one of the largest suppliers of components for cell phones,
computing equipment, printers, video game consoles, and other electronics equipment. It was at
this point that, after 13 years as CEO, Richardson announced his intention to step down from the
position. For the next 12 months, he carefully groomed a board-approved successor whom he
felt would take the company into its next phase of growth. In explaining his resignation,
Richardson stated that he felt 14 years was long enough for any one person to serve as CEO,
particularly within a technology company. He expected to remain chairman of the board
throughout 2004. As he did not have specific plans for what he would do after leaving the
company, he was pleased to be contacted by GDF, which had been a major customer of Contract
Builder (see Exhibit 6 for Hunts analysis and appraisal of Richardsons qualifications).

Varish Ratnam

Varish Ratnam was born in a village outside of Bangalore, India. His father worked for the local
telephone company, which was then under government ownership. Ratnam was a superb
student, receiving both a bachelors and masters degree in physics from a prominent Indian
university. In 1975, he moved to the United States, where he transitioned to electrical
engineering. He earned first a masters and then a PhD in electrical engineering from the
Massachusetts Institute of Technology, completing his studies in 1980.

Ratnams first job was as a researcher in the famed Bell Labs, where he worked for four years on
network communication technologies. After a while, however, Ratnam decided that he wanted
to work on the practical application of technology to commercial products, rather than the
theoretical research he had been engaged in. In 1984, he took a position with ManuTech, located
in Massachusetts. ManuTech was a manufacturer of network communication products, and
Selecting a CEO: The Leader, the Business Builder, or the Technologist CG-15 p. 8

Ratnam served as a product manager for the company. He was excited by the fact that his
engineers worked right next door to the manufacturing facilities, allowing him to witness first-
hand the movement of products from design to production. Ratnam was steadily promoted
within ManuTech, eventually obtaining the title of vice president for research and development.
In this capacity, he was given responsibility for the development of all products company-wide.

In 1991, ManuTech was acquired by EuroTel. EuroTel was a multi-billion dollar

telecommunications company and well known within the industry for its advanced research and
development capabilities. For that reason, Ratnam decided to remain with the company.
EuroTel senior management quickly recognized Ratnams technical skill, and the pace at which
his career took off accelerated. Within one year, he was promoted to chief technical officer for
EuroTels U.S. operations, overseeing a $500 million research and development budget.

Up until this point in his career, Ratnam was viewed more as a technology expert and less as a
commercial manager. That changed, however, when EuroTel decided to place Ratnam in charge
of the companys nascent broadband division in 1995. At the time, broadband was not yet a
viable commercial product and was instead a concept technology. Ratnam was asked to take the
business and build it from scratch. He and his family moved to Europe, where the division was
headquartered. Within two years, Ratnam succeeded in developing the broadband product and
introducing the technology into the market place where it gained significant market share.

Having demonstrated his managerial skill, Ratnam was made president of EuroTels U.S.
division, and he and his family moved back to Massachusetts. As president of U.S. operations,
he was responsible for approximately one-third of EuroTels income statement. The experience
allowed him to broaden his knowledge of the companys product offerings, engage with senior
managers at a strategic level, and restructure struggling operations. He also oversaw the
acquisition of complementary businesses and demonstrated an ability to realize cost savings.

By 1999, Ratnam was promoted to the position of chief operating officer of EuroTels global
operations. As COO, he had full responsibility for the income statement. He also oversaw
technological strategy and maintained relations with key global customers. One of those
customers was GDF, whose business he came to know very well. By 2001, it became clear that
Ratnam would not be promoted to the CEO position, primarily because of his nationality: he was
not a citizen of EuroTels home country and pressure was high within the company to maintain a
national identity.

As a result, Ratnam left EuroTel to become the chief executive officer of U.S.-based Research
Co. This company was a developer of cutting-edge telecommunication and network equipment,
with over $1 billion in revenues in 2001. One of Ratnams first moves was to acquire a company
whose products complemented and helped to diversify those of Research Co. The acquisition
increased Research Co.s revenue base by 40 percent. Notwithstanding the acquisition and tough
industry conditions, Ratnam was able to generate breakeven profitability in 2002 and $200
million in net income in 2003. With one exception, he was able to beat analyst estimates for
earnings per share for every quarter with the company. He took the greatest pride in the fact that
he was able to bring back motivation to a company that had lost its competitive drive. By
Selecting a CEO: The Leader, the Business Builder, or the Technologist CG-15 p. 9

making several changes in structure and work process, he was able to engender a culture of
collegiality, strong accountability, and high expectation of what the company could achieve.

Ratnam was employed at Research Co. when approached by Hunt about the GDF position. He
had a strong interest in joining GDF, because it was a company he knew quite well: GDF was an
important customer of his both at EuroTel and Research Co. Ratnam was very respectful of
GDFs research and development and its products. He believed firmly that the company could
recover from its current difficulties and that it could reestablish a leading position in the industry.
Ratnam felt very confident that he had the skill set and knowledge to lead that turnaround (see
Exhibit 7 for Hunts analysis and appraisal of Ratnams qualifications).

THE CEO SELECTION

The GDF CEO search committee arranged to meet the three candidates on March 15, 2004 to
make their final selection. They arranged for all three executives to fly to GDFs headquarters,
where they would meet with each one individually in two-hour sessions. Having read in detail
Hunts reports on their backgrounds and achievements, the search committee would dedicate the
time less toward a discussion of each candidates history and experience and more toward a
strategic discussion of how they expected to fix GDF.

By the end of the day, Guzman, Gelt, Lindsay, and Cathcart were impressed with all three of the
candidates. They planned to take a summary of the candidates to the full board of directors,
along with their recommendation for who should be selected. Once approved by the full board,
Hunt would begin a detailed reference check and help negotiate the starting pay package for the
new CEO (see Exhibit 8 for the current compensation packages of each candidate and Exhibit 9
for benchmark compensation information from GDFs industry peers).

QUESTIONS

1. Assume that you are on the board of GDF. Provide an evaluation of whether the job
description in Exhibits 2 and 3 describes the type of CEO that is required for this turnaround
situation.

2. Discuss the positive and negative aspects of the process used by Diana Hunt to develop the
candidate list in Exhibit 4.

3. Which candidate would you select for CEO? Provide a rigorous justification of your choice.

4. Develop a compensation package that will attract your final choice for CEO and provide the
correct executive incentives from the perspective of shareholders. Be prepared to defend all
elements of your compensation package.
Selecting a CEO: The Leader, the Business Builder, or the Technologist CG-15 p. 10

Exhibit 1
GDF Corp: Historical Financial Information (1997 2003)

($ in millions) 1997 1998 1999 2000 2001 2002 2003

Revenues 2,000 2,700 3,600 4,200 2,800 1,800 1,800

Operating Profit 240 338 504 596 -336 -90 360
Operating Margin 12.0% 12.5% 14.0% 14.2% -12.0% -5.0% 2.0%
Net Income (Loss) 100 140 220 280 -520 -200 10

Debt 260 340 360 240 850 820 840

Equity 1,100 1,800 3,000 4,700 1,500 600 1,800

EBITDA 130 180 308 420 -360 -60 30

Capital Expenditures 75 100 120 200 180 45 40

Share Price 10 20 55 100 20 5 7

Note: Financial information in U.S. dollar equivalent. Operating profit and net income excludes certain charges for
impairment of intangible assets.

Source: Company annual reports.

Selecting a CEO: The Leader, the Business Builder, or the Technologist CG-15 p. 11

Exhibit 2
GDF Corp: Position Specification Document

The Position

The Board seeks an operating executive who will manage this company over the long term (five to seven years).
There are several specific core challenges that the CEO will need to take on.

The new CEO will need to establish a clear strategic course for the company, as well as create buy-in quickly. In
the context of that strategic review, the new CEO will need to do an assessment of all the companys businesses and
products and make some difficult decisions on the companys business portfolio.

The new CEO will need to address the companys cost structure and drive down costs, particularly around the broad
geographic reach of the companys support and R&D functions. In doing so, the CEO will face difficult trade offs.
It is expected, in general, that decisions need to be taken quickly and will be clearly communicated in order to instill
(and, in many cases, reinstill) a fast-paced, competitive and customer-focused organization.

The new CEO will need to address organization and people issues, with particular focus on ensuring that the
organization is, once again, world class in both talent and outlook. In some cases, this will require only a
reinstallation of confidence. In other cases, performance issues will need to be addressed and new talent may need
to be promoted or recruited.

In all matters, notwithstanding that a culture of decisiveness and speed is expected, it is equally expected that
decisions be taken with prudence and wisdom.

The new CEO will need to work with the companys customers and be available at all times to address their needs
and proactively get front and center on many of the companys major contract bids. As a prerequisite, the CEO
will need to assure that effective marketing plans exist to penetrate and serve the companys telecom service,
enterprise and government customers.

As the companys R&D capability is perhaps second to none, the new CEO will need to oversee its management in a
value added way, being experienced in and prepared to make big technology bets for the company. This activity
will also require a commercial sense around such subjects as when the company should go it alone, when it should
partner, and when it should acquire, in terms of assuring the right technologies are available at the right time.

The CEO will need to manage a very diverse set of stakeholders. S/he will need to work constructively with the
investment community on an ongoing basis and re-establish investor confidence in the company. Additionally, s/he
will need to work with regulators and other officials in several countries to be able to both influence and understand
local regulation affecting GDFs products and services. At the industry level, the CEO will, from time to time, need
to weigh in on debates over standards as well.

As the company has recently overcome accounting issues that have affected the companys historically proud self-
image (as well as external stakeholder confidence), the CEO will need to lead and operate the company clearly,
creating a team atmosphere in which the management team addresses bad news and critical issues in a timely and
effective manner. It is therefore critical that an atmosphere of openness and trust be established by the new CEO.

Lastly, notwithstanding a need to address all of the companys global opportunities, the CEO will need to address
and manage the extraordinary opportunities that the company has in Asia specifically, not only as a major sourcing
and supply chain hub, but also as a significant emerging market for the companys products and systems.

Source: Diana Hunt, DH Associates.

Selecting a CEO: The Leader, the Business Builder, or the Technologist CG-15 p. 12

Exhibit 3
GDF Corp: Ideal Candidate Profile, Chief Executive Officer

The Ideal Candidate

The successful CEO will need to bring a special set of commercial and managerial experiences, as well as personal
characteristics, to the position at GDF. It bears repeating that the ideal candidate will possess the highest ethical
standards and impeccable charactersomeone with superb judgment and balance in terms of ego and attitude. S/he
will bring a demonstrated global outlook in terms of markets, supply chain, people and finance. In light of the
special situation GDF finds itself in, the ideal candidate will need to bring the following set of competencies to the
job (in no specific order):

Leadership. The CEO must bring a natural ability to inspire and motivate others and to do so through the
experiences and intellect s/he brings through both words and deeds. The CEO will need to be able to attract and
develop a world-class management team and by his/her example, get them to work together in a highly functional
way. The CEO will need to more fully empower the management team and drive decision making down in the
organization. The successful candidate will be either a sitting CEO or a major business head who has overseen all
functional elements in a full general management role of an organization of significant size in terms of people,
revenues and profits.

Industry Knowledge. The ideal candidate will come from the non-service side of the telecommunications industry
and bring a record of success in dealing with decisions about technology and customer needs. S/he will have a
strong view of where the industry is going and have the expertise to position the company to exploit opportunities
across the core markets chosen by GDF. The ideal candidate will bring an ability to gain access to (and influence)
key customers and industry stakeholders. Less ideal, but still viable, would be an executive who has successfully
managed major technologies serving related industries, but where understanding and experience in making the big
bet is no less relevant.

Strategic Orientation. The new CEO must bring a strategic mindset to GDF and be able to manifest a set of
experiences where strategic decisions have been successfully undertaken. In so doing, the successful candidate will
bring a very high intellect to the job and an even stronger commercial orientation and bias to effective action and
implementation. S/he will have a refined sense of where the industry, the competition, and the technology are going
and coalesce this thinking into a clear set of strategies and action plans that the entire company can commit to. This
orientation will include an objective sense of what businesses to be in, what to divest, when (and with whom) to
partner, and when not to participate at all.

Strong Results Orientation. The ideal candidate will bring an obsessive focus to results, both short and long term,
and ensure that this ethic is driven deep into the heart of the organization. This orientation must include the creation
of a culture of accountability throughout the organization. The ideal candidate must bring a proven talent of getting
results through people, as well as a skill in delegation and empowerment that people will take responsibility for.
The ideal candidate will come from a very high performance culture where results and ethical accountability have
been achieved together.

Additionally, the ideal candidate will bring a gravitas to the position that reflects the stature and importance of that
position. S/he will be someone that people will want to work withboth internally and externally. S/he will be
experienced in managing all stakeholders, will be a superb communicator and bring credibility through personal
traits and the results already achieved through previous employment.

Compensation
A very attractive package will be offered, consistent with the world class characteristics expected from the
successful candidate. The compensation format will be developed around the short, medium and long-term
performance expectations that the board of directors has for this company.

Source: Diana Hunt, DH Associates.

Selecting a CEO: The Leader, the Business Builder, or the Technologist CG-15 p. 13

Exhibit 4
GDF Corp: CEO Candidate List

Current Worked at Current From GDFs

Name Status
Employer GDF Industry Country

Paul Akers GDF Yes Telecom Equip Yes Interested

John Jacobs Motorola Yes Telecom Equip No Not Qualified
Saul Benno IBM Yes Software No Interested
Craig Jensen CompTel No Telecom Equip No Finalist
Bill Ainsworth Alcatel No Telecom Equip No Not Qualified
Varish Ratnam Research Co. No Telecom Equip No Finalist
Frank Almay Lucent No Telecom Equip No Not Interested
Marti Rossi Alcatel No Telecom Equip No Not Qualified
James Henson Nortel No Telecom Equip No Not Interested
Dave Bliss Nokia No Telecom Equip No Not Interested
Don Reese Nokia No Telecom Equip No Not Interested
Michael Johns Ericsson No Telecom Equip No Interested
Nadir Galouche Ericsson No Telecom Equip No Interested
Ben Bolster AT&T No Telecom Service Yes Not Qualified
Tim Hecker BellSouth No Telecom Service No Not Qualified
Deutsche
Jens Luden No Telecom Service No Not Qualified
Telekom
Francisco Dias Vodafone No Telecom Service No Interested
Deutsche
Jerry Garcia No Telecom Service No Not Qualified
Telekom
John Granger British Telecom No Telecom Service No Not Qualified
James Rodden British Telecom No Telecom Service No Not Qualified
Gordon Sprek Telefonica No Telecom Service No Not Qualified
Steve Laden General Electric No Industrial No Interested
Mike Levy General Electric No Industrial Yes Not Qualified
Pradman Koll General Electric No Industrial No Not interested
Frank Richardson Contract Co. No Manufacturing No Finalist
Mike Faber IBM No Software No Not Qualified
Karl Abrams Dell No Comp. Hardware No Not Qualified
Sean Stryker Hewlett Packard No Comp. Hardware No Not Qualified
Olivier Jenou Siemens No Industrial No Interested
Clay Stapleton Siemens No Industrial No Not Interested
Hector Reyes Rolls Royce No Industrial No Interested
Henry Rock United Tech. No Industrial No Not Interested
Wilton Fulke United Tech. No Industrial No Interested
Ara Dunstan Rockwell No Software No Interested
Carlton Frays Marconi No Industrial No Not Qualified
Jasper Lynn Marconi No Industrial No Interested

Source: Diana Hunt, DH Associates.

Selecting a CEO: The Leader, the Business Builder, or the Technologist CG-15 p. 14

Exhibit 5
Diana Hunt: Analysis and Appraisal of Craig Jensen

Craig would bring a wealth of senior executive experience and leadership to the CEO position at GDF. Craig was
born in Europe and moved to the United States when still a teenager. He is a tough rugby player, and generates an
immediate perception of energy, inspiration and intelligence.

Craig has had two employers: GC and CompTel. He views both companies extremely positively because they stand
for something and have high ethical leadership. Craig possesses tireless energy, is very driven, and is a strong team
player. When one meets Craig, it is immediately obvious that he did not learn the GC values by rote. On the
contrary, they are a part of who he is, what he stands for, how he leads, and what directs his passion. It is these
attributes that he brought with him to CompTel and used to form his leadership style. The experiences gained in the
last several years at CompTel compellingly qualify Craig to be the next CEO of GDF.

Leadership. Craig is a natural leader but not what he would call a cheerleader type. He operates by personal
example and will inspire those around him by his spirit and effective sense of energy. He sets the bar extremely
high and operates with an infectious sense of controlled passion. He is known never to ask anyone to do anything
that he would not do himself. He is an excellent delegator, believing strongly in the philosophy of trust but verify.
People who work for him are inspired by his energy and pace, as well as his consistency. He is a very effective
communicator, being both plain spoken and riveting at the same time. In terms of his credibility, we would
conclude that there may be no single executive better suited to the task of re-inspiring the employees of GDF. As
CompTels chief operating officer, he led a true cultural renaissance in bringing down the traditional siloed culture
of the business units.

Industry Knowledge. Craig does not come from the telecommunications industry. His core experience in the
industry has come in his most recent years at CompTel. By education, Craig is a mathematics major and his
functional foundation is in audit and operations (which at GC is the catalyst for fast track and general management).
His only recent exposure to telecommunications has not held Craig from doing a superb job of fixing important
divisions at CompTel and bringing the company back into highly competitive viability. He has experience
reinforcing and rationalizing research and development budgets.

Strategic Orientation. When Craig joined CompTel, he came into a business that had been overbuilt by
predecessors. Craig acted quickly to reduce costs while closely analyzing and evaluating the strategies of his
competitors. The strategy that emerged from that analysis was an overnight success: CompTel regained several
points of market share and margins moved up dramatically. He did this in an overall industry environment where
growth was dropping off. At the same time, Craig oversaw the divestiture of non-core businesses.

Strong Results Orientation. As a former GC employee, Craig is laser focused on results. He positions the bar
very high and will not accept any behavior that he views as not above the bar. As a general manager, he understands
the functional interdependencies within a profit and loss statement and has developed a keen understanding of what
levers to push to gain results. He is also very good at getting team buy in and has no tolerance for individual
grandstanding. Wherever Craig has worked, he has managed for excellent results, both short and long term.

We would recommend Craig highly for the position of CEO at GDF. He has the energy and personality to re-instill
confidence among GDFs rank and file and make the difficult decisions necessary to ensure long term success. He
brings a special type of respect and empathy to his work, notwithstanding his assertive and compelling personality.
He is very bright and absorbs information well and has excellent people skills. He is a self-described blue-collar
executive with a strong work ethic, is hands on, but with a minimum of bureaucracy. If he has a single weakness, it
would be that he has a tendency to be overly loyal in some cases.

Craig possesses a very high standard of personal conduct, behaving ethically at all times. He is a strong family man
and has stayed close to his birth-country roots. He will move his family to this country if he is selected for the
position, and he does understand the long-term commitment that is required.

Source: Diana Hunt, DH Associates.

Selecting a CEO: The Leader, the Business Builder, or the Technologist CG-15 p. 15

Exhibit 6
Diana Hunt: Analysis and Appraisal of Frank Richardson

After fourteen years of extraordinary success as the CEO of Contract Builder, Frank has decided it is time to step
down. Since making his plans for leaving the company public, he has been so inundated with offers, especially from
private equity firms, that he has decided not to retire but instead to pursue a new opportunity. Because of his deep
knowledge of GDF and his absolute conviction that he can fix it, he is extremely interested in pursuing the
opportunity.

Frank took Contract Builder from a $50 million dollar contract manufacturing company to one with revenues of over
$10 billion. He did this through a relentless drive to never lose, a spectacular job of leadership and empowerment,
conceiving of and implementing several big investment bets, superb business judgment, and proving capable of
managing during times of bust as well as in times of boom (a very rare quality in an executive).

Frank projects a confidence borne from success. He is extremely bright and very numerate. He brings a global
perspective to what he does and is a voracious absorber and assimilator of information. He is very articulate and his
style of communication is direct and forceful. At Contract Builder, almost all of the telecom product makers are his
customers and he knows how they think, how they operate, where they are successful and where they are failing.
Frank is particularly passionate about GDF as they are one of his large customers.

Leadership. Frank leads as one of the team. He does not use the power of his position to inspire others to follow
him, as he is compellingly bright and forceful. He is also absolutely passionate about customers. When Frank
pitched business to one client, he was told that the deciding factors for why they selected Contract Builder were the
ease of communication, collaboration, and goodwill that they saw among the Contract Builder team. He is
extremely focused on customer relations and enjoys the outside contact. He delegates well and still knows every
aspect of his business operations. His personality is infectious. This, blended with his knowledge, business sense
and vision, has made him an executive that people believe in and want to follow.

Industry Knowledge. Mission critical elements of the telecommunications industry have been put in Franks
hands. During our interview, he provided a compelling view of what he would do if he were to run GDF, but stated
unequivocally that he is not a technologist and that he would only take the position if he could convince his trusted
technology associate to join him.

Strategic Orientation. Frank has built an exceptional contract manufacturing business. At each turn in the road, he
has outmaneuvered his larger competitors, moving from 25th in the industry to one of the top five. He has no fear of
well-calculated risk and built a strong rapport with his board of directors, which frequently backed him in his
decisions. His relationship with the GDF board will be extremely important to him, as he will seek the degree of
freedom he requires to turn the company around.

Strong Results Orientation. Frank consistently delivered results at Contract Builder. He is decisive and has built a
culture of accountability throughout the company. In an industry that survives on the slimmest of margins, Frank
and his team have never taken their eye off the ball.

In our interview, Frank expressed a fairly deep knowledge of GDF, its cost structure, and its position within the
industry. He began breaking down, piece by piece, how he would attack the cost structure, bring an orientation to
accountability, manage the technology, bring back a belief that the company can succeed, and engage with
customers. He is astounded that certain functions are as populated as they are at GDF and would take steps to
reduce the redundancies and bureaucracy that he feels have been unaddressed.

An issue for Frank will be his full time location. He and his wife are currently building a home in the United States
and, although he will rent a place in GDFs home country, his wife will only join him occasionally. Frank assured
us that he will nevertheless make a full commitment to GDF. He understands the five to seven year commitment
requirement. His long tenure at Contract Builder attests to his ability to commit for the long term.

Source: Diana Hunt, DH Associates.

Selecting a CEO: The Leader, the Business Builder, or the Technologist CG-15 p. 16

Exhibit 7
Diana Hunt: Analysis and Appraisal of Varish Ratnam

Varish Ratnam brings an almost classic background in terms of his credentials for the position of CEO of GDF. His
educational and early career roots are in physics, engineering and the development and management of technology
products. In fact, he probably was ten years into his career before he moved from the technology side of business to
the commercial side. He made up for this, however, in his meteoric rise at EuroTel.

Varish is easy to meet and engage with. He possesses a humble but assertive style. In our interview, Varish was
extremely forthright and introspective, engaging at several times on objective self-evaluation around strengths and
weaknesses. He brings a professional level of enthusiasm to the way he communicates. He is focused and credible.
He is a very pragmatic individual and possesses a bias toward action in his attitude and his thought process. He does
not over-intellectualize or create unnecessary complexity. He very much possesses passion for the industry, where it
is going, and has a proven ability to look around the corner and make decisions based on his view of the industry in
three years.

Leadership. Varish has an interesting style of leadership. He is neither low-key nor high-key. Rather, he has a
style of calm and firmly balanced energy. He is extremely credible and encourages debate within his management
team, of which he has very high expectations. He is apolitical and non-bureaucratic, possessing what he calls an
impatient style, characterized by lets get on with it. When asked recently by his board to describe the role of a
CEO, he responded that it required 1) the ability to see the bend in the road before anyone else and to develop
strategies that invest where the puck will be, 2) high credibility with customers and investors as they are the ones
buying your future growth story, 3) a very strong focus on near-term results; 4) the ability to create a team
environment, and 5) the ability to create a high-performance culture that fosters organizational excellence. Varish
does not take credit easily and, by nature, does not start many comments with I. Though very much
acknowledged as an industry leader, he is not high profile in behavior.

Industry Knowledge. Varish has been in the telecommunications industry for over 20 years. His experience covers
the gamut from advanced research, to development, product management, technology deployment, business unit
management, and public company CEO. Through his career, he has had either direct responsibility or oversight on
virtually all the businesses and markets GDF is involved in. He understands industry trends, and he knows what
industry competitors are doing. He is well respected by customers for his knowledge and his ethics.

Strategic Orientation. Although he claims to be otherwise, we view Varish to be an excellent strategist. He built
the EuroTel broadband business globally from a standing start to over $1 billion. He also took several steps to
introduce the EuroTel brand in the U.S., including strategic acquisitions that accelerated growth. In his latest job at
Research Co., he very successfully took advanced technology concepts from the internal R&D department and
integrated them with acquired technologies to create new and advanced products.

Strong Results Orientation. Varish views himself very much as an operating manager who is highly focused on
growth, profits, costs and investments. He is very skilled at integrating acquisitions and realizing the cost and
technology synergies. After making one acquisition at EuroTel, he realized $150 million in savings through cost
reductions. He has generated very favorable operating results through his career both at EuroTel and at Research
Co.

Varish has worked on both sides of the Atlantic and is very comfortable operating across cultures. He is familiar
with Asia as a sourcing and supply area. Varish rose to the president and COO position at EuroTel and believes he
would have become CEO were he a citizen of EuroTels home country. For that reason, Varish eventually decided
to leave the company.

Varish has reservations about moving his family to GDFs home country as he has a young child with learning
disabilities. He is ready to commit to a rented residence for himself, though.

Source: Diana Hunt, DH Associates.

Selecting a CEO: The Leader, the Business Builder, or the Technologist CG-15 p. 17

Exhibit 8
Diana Hunt: Present Terms of Compensation for Three Finalists

Craig Jensen

At CompTel, Craig had an annual salary of $925,000. His annual bonus target was 125 percent of base (maximum
250 percent). For 2003, he was to receive a bonus of $1,200,000. He also received a long-term incentive that was 2
times salary (maximum 4 times). For 2003, he was to receive a payment of $3.2 million.

He received between $4 million and $6 million in stock options every year. He also received restricted stock units
of between $3 million and $5 million every three years. When he joined CompTel, he received restricted shares
aggregating to $15.2 million plus a $1 million sign on bonus to make good on the bonuses he was leaving on the
table at GC.

He also received a separate pension account that commenced at $2.5 million and earned a guaranteed 7 percent per
year.

Frank Richardson

At Contract Builder, Frank earned a base of $992,000 with a bonus target of 150 percent. He still has several
options in the money based on his staying with Contract Builder as chairman of the board. He views that the board
will be amenable to an acceleration of these options that total $35 million. He is already a man of significant net
worth, thus we do not see any significant issues arising. In fact, he stated that he would probably want to buy a large
amount of GDF shares at the earliest opportunity.

Varish Ratnam

At Research Co., Varish earns a base salary of $825,000. He has a target bonus of 100 percent of salary. Varish
currently earns 2.5 times what his executive management team is earnings. Given public exposure of this
information, Varish was sufficiently uncomfortable with this that he put his 2003 bonus of $700,000 into the bonus
pool for his executive team and took out only $100,000 for himself. When he signed on with the company, he was
granted $2.5 million in stock options and $4 million in restricted shares (one-quarter of which are vested).

Source: Diana Hunt, DH Associates.

Selecting a CEO: The Leader, the Business Builder, or the Technologist CG-15 p. 18

Exhibit 9
Benchmark Compensation: Three Global Telecommunications Companies

($ in millions) Competitor #1 Competitor #2 Competitor #3

Base Salary $1.0 $1.2 $1.5

Annual Cash Bonus

Target 170% 150% 140%
Maximum 300% 300% 270%
2003 Actual $3.0 $3.6 $4.0
2002 Actual - 1.8 2.1

Long-Term Cash / Stock

Target 250% 300% 250%
Maximum 500% 500% 500%
2003 Actual $2.5 $3.6 $3.8
2002 Actual - $3.3 $3.5

Sign on Bonus
Cash $0.5 $0 $0.6
Stock Options $18.1 $21.6 $24.0
Restricted Stock $8.4 $7.6 $8.2

Annual Stock Options

2003 Actual $5.0 $8.3 $14.0
2002 Actual $3.2 $4.1 $9.5

Restricted Stock
2003 Actual - - $1.9
2002 Actual - - -

Pension $14.0 value $0.8 / yr $34.0 value

Severance / Change Control 3x salary 3x salary, 3x salary,

3x bonus, 3x bonus, 3x bonus,
options vest options vest options vest

Plane, Personal Use Yes Yes Yes

Financial Planning $15K $15K $15K

Source: Diana Hunt, DH Associates.