When The CEO Lives far Away

By Rick Romell
Milwaukee Journal Sentinel.

Dodgeville. New York. Dodgeville, New York, Dodgeville, New York.

How’s a busy CEO to choose?

If you’re New York resident Federica Marchionni, globally focused executive with luxury retailers and mother of a 7-year-old, Italian-speaking boy who goes to a special Italian school in New York City, you’re probably going with the Big Apple.

And if you’re the board of directors of Lands’ End Inc., keen to hire someone like Marchionni to help restore luster to a brand that’s been shackled for a decade to woebegone Sears Holdings Corp., you let her.

So the agreement forged to bring the chic former executive at Dolce & Gabbana (think $3,600 charmeuse flounce dresses) to Lands’ End (think $35 pique cotton polo shirts) tilts heavily toward Marchionni staying in New York.

In February, Marchionni, 43, was named chief executive of Lands’ End, the $1.5 billion retailer of classic clothing based in Dodgeville, a southwestern Wisconsin city of 4,700.

In a securities filing shortly after her appointment, Lands’ End said Marchionni’s primary workplace would be in New York. Just over a week ago, in another filing, the company included a letter from board chair Josephine Linden that spells out the arrangement in detail.

It specifically states that Marchionni won’t have to move, nor be required to perform the majority of her duties at Lands’ End’s “current principal executive offices in Dodgeville, Wisconsin.”

But the board appears to recognize the importance of at least some personal presence in Dodgeville, where most of Lands’ End’s 5,000 U.S. employees work. Marchionni is required to be there an average of at least one week a month.

She also is to attend in person all board, board committee and executive strategy meetings, as well as important social events (a holiday party, for example) that the Lands’ End chief executive historically has attended. The company agreed to try to schedule those meetings and events during weeks when Marchionni is otherwise required to be in Dodgeville.

Marchionni was born in Italy and came to New York less than four years ago to head the American wing of Dolce & Gabbana. She and her husband have their son in a school where he can speak Italian, and they don’t want to disrupt him, Lands’ End spokeswoman Michele Casper said.

During her first couple of months with Lands’ End, Marchionni has been spending most of her time in Dodgeville “because she really wants to get to know everybody,” Casper said.

But she said Lands’ End also has an office in New York, and that company executives move between Dodgeville and there as needed. The previous head of merchandising and design, the position is vacant at the moment, “had weekly presence here in New York,” Casper said.

Further, Marchionni has a global view of Lands’ End’s business and will be traveling a lot internationally, Casper said.

Whatever Marchionni’s reasons for working mainly in New York rather than the Lands’ End headquarters in Dodgeville, the arrangement poses issues, said Hart Posen, a professor of management and human resources at the University of Wisconsin-Madison.

Posen said chief executives need not be present to fulfill one of their main challenges, deciding just what a company should be doing.

“But the other challenge, equally important, is the getting-it-done challenge,” he said. “That’s an organizational challenge, and that is much more difficult to do at a distance.”

Face-to-face encounters provide subtle cues and nuances in how employees respond to the chief executive, and in the signals she sends by her own behavior, Posen said.

And he said Lands’ End, which is widely viewed as having been damaged during its 12 years of ownership by struggling Sears Holdings, needs a good deal of attention.

“This is a challenging organizational environment,” said Posen, who has been following the company, “and it’s going to need a lot of hands on effort to get it to change.”

Sears bought Lands’ End in 2002, and spun it off last year.

Bonnie O’Neill, a management professor at Marquette University, said the long-distance arrangement raises questions about how employees will perceive Marchionni.

But the fact that she is staying in New York in large part because of family may work in her favor, O’Neill said.

“It can be something that’ll help her bridge the issue of not being here all the time,” she said.

Marchionni _ whose compensation package includes a $950,000 salary, a $1 million signing bonus, a 2015 incentive award of at least $475,000, and $2.75 million in stock that vests over three years, isn’t the first fly-in chief executive, but such arrangements are not the norm. A 2007 study of the residences of CEOs of S&P 500 companies estimated that 7 percent lived at least 250 miles from headquarters.

And long-distance commuting can be tough, sometimes for the company, sometimes for the CEO.

In 2004, when Starwood Hotels & Resorts named tapped Coca-Cola executive Steven Heyer its new CEO, the suburban New York hospitality company let Heyer remain in Atlanta.

Two and a half years later, Heyer resigned. Succeeding him was former Coors Brewing chief Frits van Paasschen. His employment agreement was different. Within 30 days, it said, “executive shall relocate himself to housing in the New York/Connecticut area.”

Brendan Hoffman, meanwhile, experienced the difficulties from a personal standpoint.

A former executive with Manhattan-based retailer Lord & Taylor, Hoffman was named in January 2012 as the new chief executive of Bon-Ton Stores Inc.

Hoffman’s three-year employment agreement with Bon-Ton, the $2.7 billion parent of Boston Store, Younkers and other department stores, called for him to work from Milwaukee, and envisioned that he would relocate here by February 2015.

But 11 months before that deadline, Hoffman opted out of renewing his contract. He said the weekly commute from his New York home had been more strenuous than he had anticipated for himself, his wife and their school-age children, according to a transcript of a conference call posted by investment research platform Seeking Alpha.

His replacement, Kathryn Bufano, has moved to Minwaukee, as required by her employment agreement.

“For us, it’s a function that the corporate staff is there (in Milwaukee), the merchant team, the sales promotion and marketing team is there,” said Kim George, a divisional vice president for Bon-Ton. “And we just feel that is the best arrangement, to have the CEO be in direct contact and working within the team.”

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