Arconic has announced that Klaus Kleinfeld, by mutual agreement with the Arconic board of directors, has stepped down as chair and CEO of Arconic and has resigned as a board member.
Kleinfeld stepped down from these roles with the company by mutual agreement after the board learned that, without their consultation or authorization, he had sent a letter directly to a senior officer of Elliott Management that the board determined showed poor judgment.
According to Arconic, this decision was not made in response to the proxy fight or Elliott Management’s criticisms of the company’s strategy, leadership or performance and is not in any way related to the financials or records of the company. The board says it continues to believe that under Kleinfeld’s leadership, Arconic “successfully executed a transformative vision and improved business performance amid a complex market environment” and “reaffirms the strategy developed under Mr. Kleinfeld’s leadership and shared with our investors, customers and employees.”
David P. Hess, a current board member, has been appointed as Interim CEO of Arconic and will remain on the board. According to Arconic, he has decades of experience in leading aerospace and industrial businesses.
Patricia F. Russo, Arconic lead director, has been appointed as interim chair of the board. She has served on the board since 2008 and has been serving as lead director since 2015.
“The board is focused on hiring a world-class CEO to lead Arconic into its next chapter,” Russo says. “We are focused on ensuring a smooth leadership transition for our customers, employees and many stakeholders. The board is deeply grateful to Klaus Kleinfeld for his dedication and service as chair and CEO of Arconic, and previously of Alcoa Inc., and appreciates his assistance with this transition. Klaus led a complex and highly successful transformation of Alcoa Inc. that culminated in the launch of two strong, standalone companies—Alcoa Corp. and Arconic. Today, Arconic is a leading advanced manufacturer of highly engineered products with strong market positions.”
Kleinfeld says, “I have had the honor and the privilege of working with so many talented and dedicated colleagues at Alcoa Inc. and now at Arconic. Together we have accomplished a lot. Today, Arconic is well-positioned for the next phase. I am committed to supporting David and the board through this transition phase.”
Russo says, “We are fortunate to have a proven leader of David Hess’ caliber to step into the CEO role on an interim basis while the board conducts its search process for a permanent CEO. We are confident that David’s abilities and experience will ensure a smooth transition for the benefit of all of our stakeholders.”
Hess says, “I look forward to working closely with the board, senior leadership team and our dedicated and hard-working employees. Klaus and the Arconic team have built a great company and over the coming months my focus will be on continuing to serve our customers seamlessly and deliver for our shareholders.”
Elliott Management’s central objective—a CEO change—has been realized at Arconic, the company says. With the completion of Arconic’s separation transaction last November, the substantial refreshment of its board composition with 7 of its 12 directors having joined the board since the beginning of last year, and now the departure of Kleinfeld, Arconic recently has undergone a “tremendous amount of change,” Arconic says, adding, “It is Elliott Management's decision whether to continue to burden Arconic and its shareholders with its highly disruptive and distracting proxy fight or to support Arconic in facilitating an effective CEO search and a strong transition.”
Elliott Management, a hedge fund that is among Arconic’s shareholders, was seeking to place four people of its choosing onto the Arconic board and to replace the Kleinfeld as CEO. According to the Arconic board in a letter addressed to fellow company shareholders dated March 24, 2017, it members “listen eagerly and openly to the views of Arconic’s shareholders. And, indeed, we have listened carefully to Elliott: in fact, we have held nine meetings with Elliott’s representatives since 2015.”
The Arconic board says of its seven new directors, three originally were recommended by Elliott.
The board goes on to say, “As directors of the company, we have unique access to internal information and a front-row seat to the execution of the company’s business plan. We have visited operating facilities, spoken with many employees, heard from customers and suppliers and reviewed countless pages of internal documents and analyses.
“Our conclusion is clear: Arconic has the right strategy and the right team to drive short-term and long-term value for shareholders,” the board says in its letter, adding that it “made its determination about strategy and leadership after carefully considering the views of Elliott, other shareholders and outside advisors.”