John Stanton: Managing Through Adversity

By Bethany Coates, H. Grousbeck
2007 | Case No. E275

This case asks students to evaluate how to handle three general management challenges that cropped up for John Stanton, the CEO of Western Wireless Communications, during a difficult period in the company’s history (the aftermath of the Internet “bust”): 1. When John Stanton met with Kirk Boyle, WWC’s general counsel, for his one-year performance review in August 2002, Boyle indicated just one disappointment: that his option package was completely under water, especially compared with his newly hired peers. He asked Stanton whether the company could do anything to make the situation more “equitable across executives with similar levels of responsibility who had joined the company in the same 7-month period.” When Stanton asked whether he had a specific recommendation in mind, Boyle said he knew of other companies that had either re-priced options or bumped up the option package in question so that the value of the shares therein was on par with his or her peers. Stanton wondered what, if anything, he should do about the situation. 2. In the spring of 2001, it became evident that WWC’s domestic operations improvements had not kept pace with the organization’s aggressive growth trajectory. Stanton gradually decided that more discipline needed to be injected into the company’s operations. The current president and COO, Brian Henderson had led the domestic wireless operations since the company’s founding, was well-liked and carried out some aspects of his job with aplomb. However, Stanton noted, “Some key initiatives had been mismanaged and it was evident to me that the trend would worsen, rather than improve.” The need to bring in a new executive became pressing because Western needed to complete a conversion from analog to digital service. AT&T had recently lost thousands of customers during a similar shift. Although Stanton felt it should be done, replacing a longstanding COO was still a difficult decision. Further complicating matters, Stanton thought of Henderson as his “closest friend in the world.” How should he handle the replacement? 3. As the stock price continued to head downward during the first two quarters of 2002, several directors questioned whether the company should look for a buyer, a course of action that Stanton vigorously opposed. When the share price slid to $3.29 in May 2002, Carter Sullivan called Stanton to discuss the situation. Sullivan, who was the head of the audit committee, was the most persuasive and powerful outside director. For some time, he had been encouraging the company to look for a buyer. In his view, the market was clearly not valuing Western’s business model. He thought shareholders would be better served if WWC allowed itself to be acquired by a larger company. During their conversation, Sullivan said, “John, there is an adage on Wall Street that once the price of stock drops from a ‘shoe size’ to a ‘drill bit’ size, it never recovers. Western’s share price has been declining for 30 months. I have never seen a strong recovery after this kind of tailspin. It is time to look for a strategic exit.” Sullivan also lightly hinted that Goldman might want him to start reprioritizing his time, which Stanton inferred meant possibly leaving Western’s board. Stanton wondered how to keep the rest of the board behind him and how to deal with the director.

This material is designated for use in specific Stanford GSB classes only. For inquiries, contact the Case Writing Office.