Alex Molinaroli, the chairman and chief executive who oversaw a series of significant changes to Johnson Controls International plc, will leave the company he has been with since 1983 on Sept. 1.
The board of Johnson Controls unanimously approved the appointment of George Oliver, currently president and chief operating officer, as the next chairman and CEO.
Shares of the company’s stock were trading higher on Monday morning. A research note from Milwaukee-based Robert W. Baird & Co. indicated the move would likely be a positive one.
“We view the accelerated transition positively, as it now provides a clearer leadership structure for the company and shows company/board recognition of greater accountability. Longer term, the CEO transition could be a building block for other strategic moves (such as possible alternatives for battery business),” the Baird note said.
The decision accelerates a transition plan put in place as part of the merger of Johnson Controls Inc. and Tyco International plc last year. The new timeline matches the plan originally proposed by Tyco during merger negotiations. Johnson Controls had sought to have Molinaroli stay on as chairman and CEO for 24 months, followed by an additional 12 months as executive chairman.
The two companies eventually agreed on a plan calling for Molinaroli to stay on as CEO of JCI for 18 months after the merger, before transitioning to an executive chairman role for 12 months when Oliver took over as CEO.
Instead, Molinaroli will be leaving the company 18 months ahead of schedule and stepping down from the CEO position six months early.
“I want to thank all of our employees for their continued trust, commitment and incredible contributions,” Molinaroli said. “The company has a great strategic foundation and is well-positioned for growth as a market leader in buildings and energy solutions. I’m confident as I’ve worked with George over the past year that he and his management team are well-positioned to propel the company forward.”
Johnson Controls also announced former ManpowerGroup chairman and CEO Jeffrey Joerres, who helped negotiate the succession plan, had stepped down from the board. In a securities filing, JCI said the resignation “was not the result of any disagreement with the company on any matter relating to the company’s operations, policies or practices.”
“It has been an honor to have served on the Johnson Controls board for the last 16 years,” Joerres said. “I thank Alex for his dedicated service and am confident that the company will be well-served under George’s capable leadership.”
Jürgen Tinggren has been named lead independent director in Joerres place.
Tinggren said as the company approached the one-year anniversary of the JCI-Tyco merger, it is “an opportune and appropriate time to implement this planned leadership succession.”
“The board has been impressed by George’s leadership and oversight of the integration, and we believe accelerating the transition provides clarity and continuity as we move into the next phase,” Tinggren said.
Johnson Controls is targeting more than $1 billion in cost and productivity savings from the merger and has said repeatedly this year those efforts are ahead of schedule. But gains in sales haven’t followed at quite the same pace, up just 1 percent during the third quarter.
Executives acknowledged on the most recent earnings call that implementing a leaner structure and taking out layers of management had an impact on the North American buildings business, the largest area of overlap between Tyco and Johnson Controls.
“We have been executing a robust integration plan to maximize the skill sets and capabilities of the combined company, develop solutions to better meet our customers’ needs and realize approximately $1 billion of cost savings,” Oliver said. “As CEO, I will continue working with the board and our employees around the world to deliver on the Johnson Controls promise to make the world a more productive, secure and sustainable place. I would like to thank Alex for his direction and partnership, both before and during this critical year of change.”
After taking over as CEO in October 2013, Molinaroli embarked on a series of major changes at JCI that culminated with the Tyco merger. The company spun off its automotive seating business into a standalone company now known as Adient. Johnson Controls also entered into a global joint venture with Hitachi Ltd. and sold its Global WorkPlace Solutions business to CBRE Group and Brookfield Asset Management.
Molinaroli became a lightning rod for controversy at times, with his personal life spilling out into public view. The Johnson Controls board stood behind him after his involvement with a Ponzi schemer came to light. His annual incentive performance program payment was also cut by 20 percent in 2014 after an affair with a consultant the company hired.
As part of the merger, Molinaroli agreed to an amended change of control agreement that paid him $20 million in cash and stock as a result of the merger, down from the $39 million he could have received. The package included a $10 million cash retention award and $10 million in restricted company stock, with a vesting date 30 months after the merger.
In a January securities filing, Johnson Controls said it did not expect to make additional severance payments “if the succession plan proceeds as planned.” Molinaroli will now be eligible for $63 million in cash severance and bonus payments because of the accelerated transition, the company indicated in a securities filing Monday. He is also eligible for accelerated vesting of the restricted stock awards he received as part of the amended change of control.
