Aiken took over at Essendant from Cody Phipps in May 2015, initially on an interim basis before being named permanent CEO a few months later. The former CEO of US Foodservice was no stranger to Essendant, having been on its board in two spells beginning in 2010. But the 54-year-old has decided to return to the food industry as CEO of $6 billion private label food and beverage supplier TreeHouse Foods which, like Essendant, is located in the Chicago area.
TreeHouse is going through its own challenges following the acquisition of the private brands business of ConAgra Foods last year, a company-wide restructuring and a salmonella-related product recall last November. In spite of – or perhaps because of – these, Aiken has been lured back to the food business despite taking what is, initially at least, a cut in base salary and stock awards, although he will receive a $500,000 one-off payment from TreeHouse after foregoing severance benefits at Essendant.
Wall Street reacted negatively to Aiken’s departure from Essendant, sending the wholesaler’s share price down by more than 11% on the day of the announcement. That suggests a lack of confidence more than anything: departures of underperforming CEOs are usually welcomed by investors and are followed by an uptick in a company’s share price.
Ironically, on Aiken’s watch, Essendant’s market value fell by about 50% after it repeatedly lowered its earnings forecasts amid declining sales and lower profit margins, brought on by the secular challenges in the office products industry and the growing online threat from the likes of Amazon. But there was a plan in place, the pain of the move to a common operating platform for the office products and jan/san businesses had been endured, and there has been more optimism recently about the US economy.
However, Aiken’s resignation means that Essendant’s two most senior executives have left the company in the past few months: former CFO Earl Shanks announced his retirement in April after only about 18 months in the job. Unexpected senior leadership departures like that don’t go down well in the investment community, especially when a company is in the middle of a strategic transformation. Why have they jumped ship when their work is seemingly unfinished?
Whatever the answer(s), the timing of Aiken’s decision is certainly not ideal for Essendant. There have been a lot of organisational and operational changes over the past 18 months; what customers want now is stability and clarity about the company’s strategic direction. Whether they will get that remains to be seen, but senior leadership changes rarely happen without at least some ripples.
Ric Phillips – head of the wholesaler’s Industrial Business Unit – has been drafted into the CEO position on an interim basis. He was seemingly chosen by the board ahead of industry veteran Harry Dochelli, who’s in charge of the larger office and facilities division, perhaps on the basis of his [Phillips]’ previous e-commerce leadership experience.
Both men will have an important role to play in ‘steadying the ship’ until a permanent CEO is named following an executive search that will consider internal as well as external candidates.