Stevenson Industries

Stevenson Industries (A)

Simon Carlson, chairman of the board of Stevenson Industries, weary from the events of the proceeding months, pondered the relief he might feel if he were to tell the board of Stevenson Industries he was resigning as “non-executive” chairman. While Simon felt an enormous responsibility to the family shareholders he represented, he feared he was at an impasse with the board.

Simon’s issue of contention involved Paul Steel, president and chief executive officer of the $150 million dollar a year company, who was hired 15 months earlier. Despite the thorough two-year CEO search process the board had conducted to fill the position, it was evident to Simon that Paul Steel was not the right person for the job. Within a year of hiring Steel in October of 1997, Simon became alarmed by his management approach, some of his decisions, and a noticeable decline in employee morale. Simon felt that Steel’s management actions had warranted a strong warning by the board several months earlier. But at that point, his board members were divided about Steel, feeling that they had a responsibility to support him as CEO, and to keep an appropriate distance from the company’s operations.

Simon concluded that Paul Steel’s values were not in alignment with those of the family shareholders of the fourth generation family owned industrial company founded 95 years earlier by his great grandfather. Nor, for that matter, was Steel’s attitude toward family companies, in general. Simon recalled the bitter uneasiness in the pit of his stomach when, during an early conversation in their relationship, Paul Steel stated, “The reason I came on as CEO of this company was that I thought it was being run professionally, despite the fact that it was family-owned.”

Simon was also convinced that Steel’s vision for the company was not a fit with the culture of Stevenson Industries or respectful of the traditions which had been fundamental to the company’s success. In particular, Steel’s proposed business strategies for risky large-scale acquisitions were not in the company’s best long-term interest and warranted serious concern.

Simon called a board meeting for January 21, 1999 where he would state his desire to terminate Steel’s employment and propose to assume the CEO role, himself, in the interim until a suitable replacement could be found. Simon stated with conviction:

Paul Steel is just not someone I want to expend the effort to work with anymore. There’s a sensitivity that I have about what is right for me, the shareholders, and the company. I’m not sure that I can continue as chairman under these circumstances. While I am deeply concerned

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Research Associate Kacie LaChapelle and Senior Lecturer