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Archive for July 1st, 2011

Principal-Agent Redemption at Motorola

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In the posting on the 1928 RCA Radiola 18 I included some notable events that happened in that year.  Turns out that in 1928 Paul and Joseph Galvin incorporated Motorola as the Galvin Manufacturing Corporation.

The Galvin family ran Motorola from 1928 up until 2003.  Then this happened

On Wednesday, September 17, 2003, Motorola’s board had a routine meeting at the company’s headquarters, in Schaumburg, Illinois, and discussed its unhappiness with Galvin. During his tenure, Motorola had made some disastrous mistakes. He oversaw the launch of the Iridium satellite-phone system, which cost Motorola $2.6 billion before it went bankrupt. He clung to the money-losing semiconductor division despite the board’s insistence that he sell it. Perhaps worse, he allowed the company to miss the transition in the late 1990s from analog cell phones to digital ones, enabling Nokia to blow past Motorola in handset market share. At the time, Motorola’s being bested by Nokia was the equivalent of the New York Yankees losing the World Series to a Finnish baseball squad.

Galvin had flaws as a young C.E.O. Executives who worked with him say he stood by senior managers even after repeated screwups. “He had a hard time pulling the trigger,” says Glenn Gienko, who was Galvin’s head of human resources. “His heart got in the way.”

The following Friday, Motorola euphemistically announced that Galvin had decided to retire. Galvin made a bitter statement—unusual in such situations—saying he did not agree with the board’s decision.

So that ended the reign of the Galvin family at Motorola’s helm after about 70 + years.

So, I wanted to connect the dots with the posting on the Principal-Agency problem and this comment from the head of HR…  “His heart got in the way.”  There is much unsaid about “His heart got in the way”.  What is missing is any talk about the different constituency groups.  It wasn’t that Galvin’s heart got in the way; it was just in the wrong camp.

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Written by frrl

July 1, 2011 at 6:01 am

Posted in Uncategorized

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