Dearly departed

United Technologies endures irrelevant CEO

More companies could do with bosses like Louis Chenevert of United Technologies: irrelevant. The chairman and chief executive of the $100-billion aerospace and defence conglomerate decamped abruptly on Monday without explanation from the company. Unlike with many other corporate shake-ups, including Sotheby's last week, the stock hardly budged. UTC may yet be put on the defensive, but the muted reaction is a sign of strength.

Chenevert was well liked during his six-year reign as CEO. Helped by the successful $16-billion acquisition of aircraft parts maker Goodrich in 2011, United Technologies notched a total return of about 82 per cent during his tenure, narrowly outperforming the S&P 500 Index over that period. The exodus was clearly a surprise. UTC had been arranging press interviews for Chenevert ahead of an investor presentation next month, according to the Wall Street Journal.

Absent any reason for the decision, it would have been easy for shareholders to get spooked. United Technologies emphasised that Chenevert left for reasons "entirely unrelated to the financial performance" of the company, but said little else. It elevated Chief Financial Officer Gregory Hayes, a 25-year veteran of the company, to CEO and lead independent director Edward Kangas to fill the chairman of the board seat.

Unexpected transitions are typically bumpier affairs. Sotheby's shares jumped seven per cent in the hours after its long-serving boss was given the boot last week. When Hewlett-Packard ejected CEO Mark Hurd in 2010, the stock fell more than eight per cent. Both the coming and going of Ron Johnson at J C Penney caused its market value to lurch. At United Technologies, the shares tumbled just 1.3 per cent on Monday and then rallied 1.7 per cent in early trading on Tuesday.

Clear succession planning helped. And with United Technologies vulnerable in a world where uppity investors have growing clout, Chenevert has left the company in a relatively solid position to fend off would-be activists who would aim to capitalise on changes at the top to press for a break-up. While the details of the CEO's departure might turn out to be cause for concern, for now UTC has given companies everywhere an indispensable lesson about making their bosses dispensable.