Word: grune
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...Reader's Digest [BUSINESS, March 2] knows Wall Street wants action. That is why it acted decisively last August, when it determined that the best way to restore shareholder value was to change management, revitalize the company and position it for future growth. The board determined that George Grune was singularly well qualified to return as CEO, get the company refocused and lead a turnaround while the search for his successor progressed. People who understand publishing and direct-mail marketing know it is a business with a long lead time, not one for those who insist on instant gratification...
...Grune, a former Marine, is supposed to be an interim CEO, but he has dug in deep, and has reportedly told staffers not to call him "interim" anymore. A spokeswoman states that the company hopes a new CEO will be in place by July. That won't be soon enough for the chorus of critics down the river...
...class-A [nonvoting] shareholders are impotent to effect any kind of change," complains Jonathan Lewis, an analyst at Franklin Mutual Advisors, which is headed by the feared raider Michael Price. The outfit, which has made runs at Dow Jones & Co., Chase Manhattan Corp. and Sunbeam Corp., wants Grune gone. Says Lewis: "Grune is an ineffective manager, and I think the board of directors should expeditiously seek to replace him and/or to pursue the sale of the company." It's not quite the welcome back Grune anticipated when Digest lured him out of retirement to reclaim the CEO job last August...
...that's exactly where Grune is headed. After reclaiming his office, he axed three top executives and replaced them with managers who had worked under him previously. On his earlier watch, the company did indeed hum. He dumped unprofitable subsidiaries and added new specialty magazines. He took Digest public in 1990, and in three years revenues shot up, to $2.9 billion from $2 billion. But when he left in 1994, the company's descent had already begun...
Insiders say Grune played a role in ousting Schadt, his handpicked successor, and then dismantled much of what Schadt had set in motion. Two weeks after Grune returned, the company pulled the plug on a costly Internet search engine called LookSmart. "Over the last few months Grune has basically disowned everything his predecessor did," says Dennis McAlpine, an analyst with Josephthal & Co. Digest says it is just returning to basics. "In the last few years we drastically reduced our testing," says Thomas Gardner, vice president of U.S. marketing. "Our general philosophy was to focus on new initiatives...