“He who will not apply new remedies must expect new evils; for time is the greatest innovator.”

~ Francis Bacon, The Essayes or Counsels, Civill and Morall (1597)

This fourth installment in Lyceum’s Navigating the Succession Paradox series examines the board’s responsibility in CEO succession, reframing it not as a procedural obligation but as an opportunity to address the human dynamics that often undermine transitions. Drawing lessons from ITT Corporation’s rise under Harold Geneen and its struggles during his departure, this article explores both the board’s actions and inactions, offering actionable insights for contemporary governance.

Lyceum defines succession not only as a procedural duty of the board, but as a commitment to addressing the complex human factors underlying decision-making. This approach reframes succession as an opportunity to counteract human tendencies that, left unchecked, lead to repeated errors. Through a blend of strategic foresight and human insight, boards can act as the architects of continuity, resilience, and progression, ensuring that the company is equipped with future leaders with the competency and experience to meet the developing challenges.

Recognizing this, the board’s role should be to detect and recognize human factors and deeply understand the intentions behind the assignment of procedures, policies, practices, and board actions that regulate these human tendencies. The board is both a guardian of stability and an agent of thoughtful innovation. Bacon’s quote captures the balance boards must strike between preserving core values and adapting to evolving challenges. This dual focus can set the tone for urging boards to take an active, forward-thinking stance in succession planning, ensuring the process is responsive to both the company’s needs and shifting business landscapes, as well as taking responsible action as a bulwark against human ambition and folly.

Introducing ITT Corporation: A Case Study in Governance Challenges

The story of ITT Corporation under industrial magnate Harold Geneen is one of extraordinary growth and transformation. Yet, as remarkable as Geneen’s tenure was, the challenges faced by ITT’s board during his succession reveal critical lessons about governance and leadership transitions, and the human dynamics that often undermine them.

Geneen’s successors—Lyman Hamilton and Rand Araskog—struggled to consolidate their leadership in the shadow of his towering legacy. Each represented a distinct approach to ITT’s post-Geneen future, and their tenures illustrate the board’s varying degrees of involvement, cohesion, and foresight. This article examines these dynamics, offering insights into how contemporary boards can navigate similar challenges.

We incorporate several sources in this article fully referenced in the bibliography at the end of the article. We present the ITT Case Study which provides historical context in sufficient depth to illustrate the points. We draw alignment from Jeffrey Sonnenfeld’s 1988 book The Hero’s Farewell as well as a framework from the insights of Stanley C. Vance in his 1983 book, Corporate Leadership: Boards, Directors, and Strategy. Vance frames CEO succession and the board’s role in leadership transitions. Also, in Lyceum fashion, we combine art, mythology, and philosophy in the admixture to address Bacon’s call for “new remedies” and to help you in Navigating the Succession Paradox.

The board’s role in CEO succession can be framed as follows:

The Board as the Helmsman

While the CEO serves as the captain guiding the corporate ship, the board remains the ultimate helmsman, tasked with ensuring the corporation’s long-term stability and success. This dual role highlights the need for the board to actively engage in succession planning, not as a one-time act of appointment but as an ongoing strategic function.

1. Active Oversight Beyond Appointment:
   • Historically, boards were seen as dormant bodies, intervening only when it was time to appoint or replace a CEO. Vance criticizes this approach as “warped thinking,” advocating for continuous engagement. This reflects Bacon’s argument for applying “new remedies”—in this case, treating CEO succession as an iterative and deliberate process rather than a reactive measure.
2. Systematic Selection Processes:
   • Vance points to the emotional and often unscientific nature of CEO hiring decisions. In alignment with the “new remedies” approach, boards must adopt rigorous, data-driven methods for evaluating candidates. Objective ranking, detailed specifications, and comprehensive evaluations of each candidate’s alignment with future challenges are essential steps to counter human tendencies toward bias and emotional decision-making. Lyceum employs additional key tools that enhance the objectivity and depth of the evaluation process including:
     • 360-Degree Evaluations: Lyceum provides a comprehensive view of potential successors by gathering feedback from a range of stakeholders, including peers, subordinates, and external partners. This approach ensures that the board considers not only performance metrics but also interpersonal effectiveness and leadership style.
     • Psychometric Assessments: Lyceum’s application of advanced psychometric tools can help identify the cognitive and emotional traits of candidates, such as decision-making under pressure, adaptability, and emotional intelligence. These assessments can highlight potential strengths and weaknesses that may not be immediately apparent during interviews or performance reviews.
   • By integrating these methods into the selection process, boards can create a robust framework that prioritizes long-term organizational success over subjective preferences or biases.
3. Guarding Against Residual Influence:
   • The lingering influence of former CEOs or majority owners, as described by Vance, poses a significant barrier to effective leadership transitions. Boards must anticipate and mitigate these challenges by establishing clear governance protocols that prevent undue interference. This aligns with the need to regulate human factors, ensuring a clean and unencumbered transfer of authority.
4. The Expanded Role of Contemporary Boards:
   • Today’s boards must balance their traditional duties with an expanded array of responsibilities, including fostering collaboration with the CEO, setting performance expectations, and providing support while maintaining accountability. This dynamic requires boards to develop a nuanced understanding of their role—not as passive overseers but as active participants in the company’s strategic journey.

ITT Corporation: A Case Study in Governance Challenges

The story of ITT Corporation under Harold Geneen is one of extraordinary growth and transformation. Yet, as remarkable as Geneen’s tenure was, the challenges faced by ITT’s board during his succession reveal critical lessons about governance, leadership transitions, and the human dynamics that often undermine them.

Geneen’s successors—Lyman Hamilton and Rand Araskog—struggled to consolidate their leadership in the shadow of his towering legacy. Each represented a distinct approach to ITT’s post-Geneen future, and their tenures illustrate the board’s varying degrees of involvement, cohesion, and foresight. This article examines these dynamics, offering insights into how modern boards can navigate similar challenges.

The Rise of ITT: From Telecommunications to Conglomerate Powerhouse

International Telephone and Telegraph (ITT) began in 1920 as a New York-based holding company, founded by Sosthenes Behn. Initially focused on telecommunications, ITT expanded internationally, acquiring telephone companies in Puerto Rico and Cuba. By 1925, ITT ventured into manufacturing by acquiring American Telephone & Telegraph’s International Western Electric operations, broadening its geographic footprint.

During World War II, ITT faced significant challenges as its operations in Europe and Asia were disrupted. Behn navigated the company through these difficulties by selling foreign holdings to avoid government confiscation. But for the most part ITT had suffered badly from expropriations during World War II. After the war, ITT resumed expansion, focusing on Canada, Western Europe, and Latin America, while developing domestic telecommunications.

Geneen’s Era: Transformation and Diversification

A pivotal moment in ITT’s history occurred in 1959 when Harold S. Geneen became president and CEO. Geneen’s vision transformed $766 million revenue ITT into one of the largest conglomerates in the world at $22 billion over his tenure. He was a turnaround wizard in his various top executive positions as he moved from firm to firm prior to ITT. He had demonstrated his capabilities at American Can, Bell & Howell, Jones & Laughlin and Raytheon before moving to ITT in 1959. His shifts were in part, motivated by his desire for greater success. As he confessed to a subordinate, his ambition was to preside over a corporation larger than General Motors; then the largest industrial concern in the world.

Under his leadership, ITT shifted from its telecommunications roots, diversifying into numerous industries including insurance, hospitality, consumer goods, and manufacturing. When the smoke cleared, only about 19% of the concern’s sales were then in telecommunications equipment, ITT’s original franchise. Some 29% in industrial and consumer products, 19% in food processing and services, 13% in consumer services and the rest scattered in natural resources, defense and space programs, business and financial services and utility operations. For much of the time that Mr. Geneen was running the company, from 1959 to 1979, Wall Street believed in synergy — or the idea that the whole is worth more than the sum of its parts — and in the idea that diversification could provide a more dependable stream of earnings. Notable household-name acquisitions included Avis Rent-A-Car, Sheraton Hotels, Hartford Fire Insurance, and Continental Baking (with brands such as Wonder Bread). Geneen did not like the term “conglomerate,” he preferred to label ITT as “a unified-management, multiproduct company.”

Geneen’s approach to management of the diverse empire he had acquired was revolutionary. He implemented rigorous management controls, reporting, and oversight. He required detailed five-year plans and conducted intense monthly review meetings. He himself was a detail-oriented, workaholic. He kept more than a dozen briefcases stuffed with reports for reading at home, on planes, and during other recesses from the office. His centralized management style ensured accountability and drove consistent financial growth, resulting in 48 consecutive quarters of increased earnings—a feat Geneen touted as his hallmark achievement. For Geneen, “the highest art of professional management requires the literal ability to ‘smell’ a ‘real fact’ from all others.” He also believed that “the essential element” for all managers is “emotional attitude,” which he wanted to as a “living force.” The rest was mechanics.

By 1971, ITT’s workforce had grown to nearly 400,000 employees across 70 countries, generating $7.3 billion in annual revenues. The company was a conglomerate powerhouse, but its expansion and aggressive acquisition strategy attracted scrutiny.

Controversy and Public Perception

ITT became the focus of significant public and governmental criticism in the 1970s. Concerns about conglomerate bigness, political influence, and accounting practices emerged. The U.S. government’s antitrust case against ITT’s acquisition of Hartford Fire Insurance led to a high-profile settlement, while allegations of improper corporate conduct—such as interference in Chilean politics—damaged ITT’s reputation. These controversies highlighted ITT’s immense power and Geneen’s domineering leadership style, earning him both admiration and criticism.

Succession Challenges: A Public Concern

One of the most widely discussed questions among ITT-watchers in those halcyon days was who would replace Mr. Geneen when he reached the mandatory retirement age of 65 in 1975. The September 5, 1971, New York Times article “I.T.T. Under Fire” explicitly addressed this concern, noting that while ITT’s financial performance remained impressive, the company’s dependence on Geneen posed a significant risk. Geneen was described as an unparalleled corporate leader who had created a management structure deeply reliant on his personal oversight. His relentless work ethic and centralized control left many wondering how ITT would function without him. Analysts openly worried whether any successor could match Geneen’s intensity and capacity to manage ITT’s sprawling empire.

The most frequently mentioned candidates were the obvious internal ones: Executive vice presidents Richard E. Bennett, Francis J. Dunleavy, James V. Lester, Hart Perry and Ted B. Westfall. Most observers, however, felt that no matter who is picked, the company would change its operating techniques once Mr. Geneen steps down, if, in fact, he did — there was a school of thought that said he might continue in the chief executive’s slot for many years, first having gotten the mandatory retirement rule changed.

This public discourse reflected broader concerns about succession planning in corporate governance, particularly for companies led by charismatic, larger-than-life figures. Geneen’s dominance of ITT’s culture and decision-making processes underscored the difficulty of transitioning to new leadership. The public and the media concerns were realized in dramatic fashion.

The Board’s Actions and Geneen’s Reluctance

The board of directors had begun to pressure Geneen to formulate succession plans as early as 1972. In mid-December of that year, Geneen had a longtime friend, Francis J. Dunleavy, named president and chief operating officer and thereby signaled as his successor. But one board member commented “Dunleavy couldn’t possibly have succeeded, Geneen. It was really a gesture of cooperation with Geneen that we stuck him in there as president.” Dunleavy was seen as Geneen’s puppet – a loyalist rather than a strong contender for the CEO role. Consequently, the board rejected Geneen’s effort to have Dunleavy named as his successor. Geneen gained an extension from ITT of its general retirement age of 65 pushing his mandatory retirement past 1975 – thereby delaying Geneen’s departure. But the unraveling scandals and series of falling annual profits during the years when two thirds of the Fortune 500 companies had experienced profit gains brought shareholder discontent and added to the board’s dismay and perhaps increased the pressure on the board to accelerate succession planning.

In March of 1977, Lyman Hamilton was named President, succeeding Geneen. In January 1978, Hamilton assumed the CEO title. Geneen remained as Chairman and continued to exert influence over ITT’s operations. While Hamilton attempted to reverse the fundamental direction of Geneen toward continual growth, Geneen attempted to intervene several times as board chairman but was continually rebuffed. In July 1978, by board decree, Geneen was actually barred from attending management meetings without Hamilton’s explicit invitation.

The Company Picnic

Geneen began to prepare for a comeback. Hamilton responded with what some considered to be a sense of continued insecurity over his role. Instead of an aura of confidence, he attempted to diminish Geneen’s voice by undermining him through an inner circle of trusted advisors and denigrating him externally through press reports. Meanwhile, the stock continued to drop.

Hamilton missed the firm’s annual picnic in Brussels when he chose to go on a three-week trip to visit key Asian customers in June of 1979. Geneen, however, not only attended, but delivered an address which was followed by an enthusiastic seven-minute ovation. At the picnic the board voted to dismiss Hamilton and replace him with Rand Araskog. Araskog had been Geneen’s previous choice as successor.

Needing Room to Maneuver and Zeus’ Revenge against the Kronos Complex

The Kronos Complex is used to describe situations where an individual in a position of power or authority feels threatened by the potential of their successors and acts to suppress or sabotage them.

In Greek mythology, Kronos, the Titan, overthrew his father Uranus to take power, only to later fear being overthrown by his own children. In his paranoia, Kronos devoured each of his offspring to prevent them from usurping him.

Goya, Francisco. Saturn [Kronos] Devouring His Son. 1820-1823, Museo del Prado, Madrid

But Kronos’s wife Rhea deceived Kronos when she gave birth to Zeus. She secreted Zeus away to Crete where he was raised by nymphs. Rhea gave a swaddled stone in place of Zeus to Kronos, who believing it was his son, swallowed the stone instead. When Zeus reached adulthood, he returned to confront Kronos and fulfill the prophecy of usurpation.

Attributed to the Nausicaa Painter. Kronos & Rhea. 1902, Metropolitan Museum of Art, New York

Zeus’ escape and eventual triumph over Kronos symbolize themes of renewal, the inevitability of change, and the younger generation’s rise to power. The myth also reflects the cyclical nature of Greek mythology, where patterns of overthrow and succession are central.

To Geneen’s disappointment, Araskog announced that he would continue Hamilton’s strategy of dismantling the Geneen empire. When Geneen objected, Araskog requested that the board remove Geneen, his former mentor, from the chairmanship. Geneen’s attorney softened the removal through a pretext to his departure that a conflict had arisen “due to Geneen’s investment in a computer company that might become a competitor of one of ITT’s divisions.”

Araskog sold all or part of 100 companies between 1979 and 1987. After the $4.3 billion sale of telecommunications businesses to France’s Compagnie Générale d’Electricité, ITT’s stock almost doubled. By 1987, ITT was largely out of the telecommunications business and its $17.4 billion in sales came largely from insurance and financial services with hotels, auto parts, defense, electronics, and paper representing the remaining businesses. The closure of the Brussels headquarters marked the final demise of the golden era of Geneen’s multinational empire. The number of employees dropped from 348,000 in 1980 to 123,000 in 1987.

To gain the needed room to maneuver, Araskog had to neutralize Geneen loyalists on the board. Araskog fought off external threats of takeover, but always the most dangerous threat was the haunting image of Geneen. One board member described how difficult it was to remove this industrial legend from an active role. “It was a very distasteful job for me, a very difficult and sad job for I always liked Geneen very much. He did not want to hear what I had to say; he did not want to step down.” Geneen remained on the board and in the zone of influence until March 1983, by which time he was 73 years old.

Epilogue of the ITT Case

The Media’s Role in Shaping Succession Discourse

The media played a critical role in shaping the narrative around ITT’s succession challenges. Newspapers such as The New York Times and Time Magazine frequently highlighted Geneen’s unmatched leadership and questioned whether ITT could sustain its success without him. They noted the absence of a clear successor and the board’s struggles to assert independence from Geneen’s shadow.

These articles underscored the high stakes of leadership transitions in complex organizations. Geneen’s successors faced immense pressure to navigate ITT’s sprawling conglomerate structure while stepping out of his formidable shadow. The press’s focus on succession planning reflected broader societal concerns about corporate governance and the sustainability of charismatic leadership models.

Lessons from ITT’s Succession Saga

ITT’s history offers valuable lessons about succession planning and governance. Geneen’s centralized leadership style, while effective during his tenure, created a dependency that made the transition to new leadership particularly challenging. The board’s failure to proactively address succession exacerbated these difficulties, leading to leadership instability and strategic drift after Geneen’s departure.

Newspapers’ early attention to succession planning at ITT highlights the importance of transparency and preparedness in governance. Succession should not hinge on a single individual but must be embedded within the organization’s culture and processes. ITT’s reliance on Geneen underscored the risks of overcentralized leadership and the need for boards to assert their role in shaping the company’s future.

Conclusion of the ITT Case

ITT’s rise and fall under Harold Geneen remains a defining case study in corporate governance. While Geneen’s leadership propelled ITT to unprecedented heights, his reluctance to relinquish control and the board’s lack of a robust succession strategy left the company vulnerable. The media’s focus on succession in the early 1970s reflected broader concerns about governance in an era of expanding conglomerates and charismatic CEOs.

For contemporary boards, ITT’s history underscores the importance of decision integrity protocols and bias-compensating mechanisms in succession planning. By anticipating leadership transitions and mitigating the risks of overreliance on individual leaders, boards can safeguard their organizations’ long-term success.

ITT Case Analysis in Context

The Succession Process: From Hamilton to Araskog

Lyman Hamilton: The Consensus Candidate

Geneen’s retirement in 1977 marked the end of an era, but the board was unprepared for the transition. Without a clear succession plan, the directors ultimately chose Lyman Hamilton, a longtime ITT executive, as Geneen’s successor.

• Hamilton’s Challenges: Hamilton’s tenure was marked by efforts to maintain continuity with Geneen’s legacy while addressing growing concerns about ITT’s sprawling operations. However, he lacked the decisiveness and transformational vision needed to navigate a company of ITT’s complexity in a changing business environment.
• Board Dynamics: The board’s deference to Geneen continued even after his departure, as the former CEO remained an influential figure when he moved to the head of the boardroom table as Chairman. This undermined Hamilton’s authority and created ambiguity about ITT’s direction.

Rand Araskog: The Reformist

By 1979, it was clear that Hamilton’s leadership was not meeting the board’s expectations. The directors turned to Rand Araskog, who represented a sharp break from the Geneen era.

• Araskog’s Vision: Araskog advocated for a leaner, more focused ITT, arguing that the conglomerate’s diversification had become unwieldy. He initiated a series of divestitures aimed at streamlining the company’s operations and improving financial performance.
• Board Support: Araskog’s appointment revealed the growing rift within the board. While some directors supported his reformist agenda, others remained loyal to Geneen’s empire-building philosophy. This division hampered Araskog’s ability to execute his strategy effectively.

Lessons from ITT’s Successions

The transitions from Geneen to Hamilton and then to Araskog highlight several key governance failures:

• Lack of Succession Planning: The board failed to develop a robust process for identifying and preparing internal candidates for leadership roles.
• Continuity vs. Change: The board’s indecision about ITT’s strategic direction made it difficult for either successor to gain traction.
• Residual Influence: Geneen’s continued involvement as Chairman of the Board blurred the lines of authority and perpetuated internal divisions.

The Challenge of Board Cohesion

Fragmentation and Factions

Without Geneen’s unifying presence, ITT’s board fractured into competing factions. These divisions mirrored broader debates within the corporate world about the viability of conglomerates as a business model.

• Traditionalists: Sought to preserve Geneen’s vision of ITT as a diversified conglomerate.
• Reformers: Advocated for a more focused strategy, emphasizing core businesses.

Impact on Decision-Making

These divisions undermined the board’s ability to provide coherent leadership during the succession process. Critical decisions were delayed or diluted, creating uncertainty for ITT’s employees, shareholders, and stakeholders.

Power Struggles and Behavioral Dynamics

Geneen’s Lingering Shadow

Geneen’s continued involvement as Chairman of the Board and his close quarters executive-like involvement in ITT’s affairs complicated the board’s efforts to establish a new leadership structure. His influence often emboldened the Traditionalist faction, exacerbating tensions within the boardroom.

Behavioral Insights

The ITT case illustrates several cognitive and social dynamics that impede effective governance:

• Status Quo Bias: Resistance to Araskog’s reforms reflected a broader reluctance to abandon Geneen’s successful, but outdated, strategies.
• Groupthink: The board’s earlier deference to Geneen created a culture of conformity that stifled dissent and innovation.

Remedies and Recommendations

1. Building Cohesion and Alignment

Modern boards can draw several lessons from ITT’s experience:

• Proactive Succession Planning: Boards must identify potential successors early and prepare them for leadership roles.
• Structured Decision-Making: Clear processes for resolving disputes can prevent factionalism and ensure more effective governance.
• Managing Former Leaders: Establishing clear boundaries for retired executives can help boards assert their authority and maintain cohesion.

2. Modern Tools and Practices

Governance frameworks provided by organizations like the NACD and proxy advisory firms offer valuable guidance. However, Lyceum’s capabilities are helping clients incorporate and adapt these tools to address the human factors that drive boardroom behavior and effectiveness.

3. Practical Applications for New Remedies

The role of the board of directors in CEO succession has evolved significantly, with contemporary guidelines emphasizing proactive and strategic involvement. Insights from the National Association of Corporate Directors (NACD), the U.S. Securities and Exchange Commission (SEC), and proxy advisory firms highlight the board’s critical responsibilities in this area.

In summary, modern governance standards from the NACD, SEC, and proxy advisory firms collectively emphasize that boards must actively engage in CEO succession planning. This involves aligning succession with strategic objectives, maintaining ongoing and transparent planning processes, and ensuring readiness to address leadership transitions effectively.

1. Proactive Succession Planning:
   • Establish a long-term, adaptable plan for CEO succession that accounts for the evolving needs of the business. Regularly revisit and update this plan to align with market conditions and strategic goals.
2. Leadership Evaluation and Development:
   • Implement structured evaluations that assess not only potential successors but also the board’s readiness to support a transition. Boards should invest in leadership development to build a robust internal pipeline.
3. Managing Transitions with Clarity:
   • Create clear boundaries and expectations for outgoing executives to minimize disruptions. Transparent communication and adherence to governance standards can help maintain focus during transitions.

Conclusion

ITT’s history under Harold Geneen is a study in both extraordinary achievement and enduring governance challenges. By examining the dynamics of its succession processes, boards can better understand the critical importance of cohesion, planning, and leadership alignment.

The next installment of Navigating the Succession Paradox will explore the role of external stakeholders in succession planning, highlighting their impact on governance and strategy.

Bibliography

1. Harold Geneen, Managing (1984)
2. Robert J. Schoenberg, Geneen (New York: Norton, 1985)
3. Jeffrey Sonnenfeld’s The Hero’s Farewell (1988)
4. “ITT Under Fire,” The New York Times, September 5, 1971
5. Stanley C. Vance, Corporate Leadership: Boards, Directors, and Strategy (1983)
6. “The Harold Geneen Legacy at ITT,” The Wall Street Journal, June 1984
7. “Boardroom Battles at ITT: A Post-Geneen Struggle,” The New York Times, July 1984
8. National Association of Corporate Directors (NACD), Board Leadership Guidelines (2020)
9. “Corporate Governance Lessons from ITT,” Harvard Business Review, March 1985
10. “A Changing Vision for a Giant,” The New York Times, June 14, 1995
11. “CORPORATIONS: ITT’s Big Conglomerate of Troubles,” Time, May 1, 1972

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