Cherkasky’s exit: The internal e-mails

By James Ledbetter

I always kind of liked Mike Cherkasky, the outgoing CEO of the embattled Marsh & McLennan (MMC). I seem to remember interviewing him many years ago, when he worked in the Manhattan D.A.’s office; he was a true straight shooter and a brilliant investigator. The announcement today of his departure helped the company’s stock, so I guess investors agreed with the company line that Cherkasky had done a good job but the next phase of the professional services firm’s growth required a different set of skills.

Daily Briefing has obtained and verified the internal announcements regarding his exit, and they have some nice details. Stephen Hardis, the chairman of the board, frankly admits that “we have not been able to demonstrate consistent and sustainable improvement in either performance or shareholder value, and for this we have been criticized,” and speaks of “a growing sense of dissatisfaction among our shareholders.” That’s important, though hardly exciting, given that the stock has been stuck in the low to mid-20s for years.

In an unfortunate typo, Hardis also wrote “the Board greed that a change in leadership at this time would best enable MMC to move forward and enhance shareholder value.” I’m sure greed had nothing to do with it.

Here is Hardis’s e-mail, and Cherkasky’s note to his colleagues.

Dear Colleagues,

Earlier today, MMC announced that the company’s Board of Directors has
decided to make a change in executive management at the company. On behalf
of the Board, I would like to give you some additional context about our
decision, beyond what is in our external press release. We believe you need
to understand the rationale behind the action.

As you all know, we have made significant progress in MMC since the very
difficult days of October 2004. This is the result of the hard work and
dedication of our people, managers, and senior leadership. At the same time,
however, we have not been able to demonstrate consistent and sustainable
improvement in either performance or shareholder value, and for this we have
been criticized. While all corporations have different constituents ­
including clients, employees, communities, and suppliers ­ ultimately we are
beholden to our long-term shareowners. They are the people and institutions
who invest in MMC because they believe in us, and in our ability to create
value for them over time.

In recent weeks, the Board has considered what actions needed to be taken to
address a growing sense of dissatisfaction among our shareholders. In
discussions with MMC President and CEO Mike Cherkasky, the Board greed that
a change in leadership at this time would best enable MMC to move forward
and enhance shareholder value. Mike provided outstanding leadership for MMC
in guiding the recovery of the company in the wake of the New York Attorney
General’s actions in 2004. His crisis management skills enabled this company
to weather what seemed to be a “perfect storm” of problems, and positioned
the company for future growth. We all owe Mike an enormous debt of gratitude
for his invaluable contribution. However, we came to the conclusion that
very different skills are now needed for the “next act” at MMC.

Therefore, the Board will initiate a search for a new CEO of MMC to replace
Mike Cherkasky. We have asked Mike to continue to lead the company in the
interim, while the search is conducted.

The Board has formed a special committee of independent directors to oversee
the search process. We have asked MMC Vice Chairman David Nadler and MMC
Executive Vice President & General Counsel Peter Beshar to coordinate the
search for our new CEO.

We have clearly decided to make a change. At the same time, it is important
for all constituencies to recognize the progress that has been made by Mike
and his team during that past three years. There are too many to list here,
but some key accomplishments include:

– Resolution of numerous legal, regulatory, and shareholder issues
– Strengthened balance sheet and liquidity
– Improved standards of integrity and compliance
– Improved Mercer performance
– Improved Oliver Wyman performance
– Sustained Guy Carpenter performance in the face of difficult insurance
markets
– Execution of the Putnam sale ­ both timing and price
– Gains from and improvement of execution through operational excellence
– Appointment of a strong, new leader for Marsh

Without these actions, which Mike led or enabled, we would not be as strong
as we are today. In his discussions with the Board, Mike said something to
us that I wanted to share with you. He said: “It has been an honor and a
privilege for me to lead MMC through difficult times and position it for a
successful future. This company has as fine a collection of people as I have
ever worked with, and I am proud of what we have achieved in many areas. I
would like to thank all of my colleagues for a tremendous team effort over
the past three years, and I look forward to seeing MMC succeed in the
future.”

During the search, the Board will be actively involved with Mike and the MMC
Executive Committee, on which our operating company CEOs serve. We realize
that a leadership transition like this one can create uncertainty, but we
all feel that it is for the best. In the meantime, we need to make sure that
our clients are served well and that we continue to maintain the high
professional standards that have characterized the work of this company for
nearly 150 years.

The Board knows that the bedrock of MMC is the great people who are
committed to their clients, their businesses, their colleagues, and to
standards of excellence. We are counting on all of you to continue this
dedication, to support your business and functional leaders, and to not be
distracted as we go through this transition of leadership. Knowing that you
will come through, as you have in the past, I want to thank you in advance
for your support and your commitment.

Sincerely,

Stephen R. Hardis
Chairman of the Board of Directors
MMC

Dear Colleagues,

The Board of Directors announced today their decision to replace me as
President and CEO of MMC. At the Board’s request, I have agreed to stay on
as CEO during the search for my successor.

It has been an honor and a privilege for me to lead MMC through these very
difficult years. I have traveled to our offices all over the world and
spoken with many of you during my time here at MMC. I have been consistently
impressed by the resilience and perseverance of our colleagues and your
commitment to each other and to your clients. It is extraordinary. I believe
in you and this company.

I have always tried to act with a commitment to quality, integrity,
partnership, and execution ­ values that epitomize all of MMC. I will
continue to act in the best interests of our colleagues, our clients, and
our shareholders while the search is conducted. I know this is more change,
but I ask that you remain focused on what you do best ­ serving clients.

I thank all of you for your support over the past years. I ask you to help
each to other build on what we have accomplished together for a brighter
future for MMC.

Sincerely,

Mike Cherkasky