New McD CEO's cancer underscores COO void: Bell surgery days after Cantalupo death

Nation's Restaurant News, May 17, 2004 by Amy Garber

OAK BROOK, ILL. -- McDonald's Corp., stunned by two major blows to its leadership team in less than one month, was under the gun to name a second-in-command after its newly appointed chief executive, Charlie Bell, underwent surgery May 5 for colorectal cancer.

The surgery, which came 16 days after the company's previous chairman and chief executive, Jim Cantalupo, died unexpectedly from an apparent heart attack, put added pressure on McDonald's to fill Bell's recently vacated position as chief operating officer.

Speculation on internal candidates for the job included Jim Skinner, vice chairman; Russ Smyth, president of the European division: Mike Roberts, president of the U.S. division; and Claire Babrowski, who in December assumed a new role as chief restaurant operations officer while retaining oversight for the Australia and New Zealand markets.

Although the world's largest restaurant chain initially was applauded for swiftly naming Bell, 43, to succeed Cantalupo, Bell's illness raised new questions for McDonald's regarding succession plans.

Bell is the youngest chief executive in the company's 49-year history, and although he will be out of work for an undetermined amount of time, McDonald's said he would remain as chief executive and president. Two days after his operation, Bell already was sending out e-mails and voice mails to his staff, McDonald's said.

Despite enormous challenges over the last 12 months--ranging from the first confirmed domestic case of mad-cow disease in December 2003 to being blamed for the nation's obesity epidemic--McDonald's posted robust sales growth under Cantalupo's leadership.

Following Cantalupo's death last month, many observers voiced confidence that Bell would be able to keep the company moving in the right direction. McDonald's posted impressive April sales results with U.S. same-store sales up 13.5 percent and a rise in European comparable-restaurant sales of 5 percent. Global monthly same-store sales were up 10.5 percent, a record for April.

On news of Bell's surgery, McDonald's shares fell nearly 2 percent in one day to close at $27.27, but they didn't drop anywhere near record lows of $13 from early 2003. The 52-week high is $29.98.

David Palmer, a New York-based restaurant analyst with UBS Investment Research, said any weakness in the share price represented a buying opportunity, and he predicted that Bell's recovery could take up to two months.

"We believe that management can stay the course in Charlie's absence," Palmer noted. "Importantly, the strategic direction for the company is in place, and momentum is strong or returning in major markets. As a result, we believe that Charlie's one- to two-month recovery will do little to derail results."

Bell is expected to make a public appearance this month to lead the company's May 20 annual meeting, which will be held at McDonald's Oakbrook headquarters.

At presstime the company had declined to disclose specifics on Bell's condition, citing his privacy, but officials described the surgery as a success and said his recuperation would be brief.

Two days after his operation, Bell sent a recorded message and an e-mail to all the company's employees, telling them that he is "feeling good, resting comfortably and looking forward to a complete recovery. In fact, I am antsy to get back to work, but I will follow doctor's orders and recuperate fully before returning to the office." Bell also expressed "tremendous faith in our management team to continue the great momentum that is driving our results."

Although the company provided no details on Bell's prognosis, the survival rates for colorectal cancer are high when the disease is detected early, according to experts. It was unclear whether Bell's cancer was detected as the result of symptoms, or if he had an extensive physical screening after recently being named chief executive.

Bell, who is a native of Australia, is the first non-American chief executive of McDonald's and only the sixth person to hold that post in nearly five decades. After first joining McDonald's as a crew member at the age of 15, Bell worked his way up the ranks, becoming Australia's youngest restaurant manager, at age 19. He was a company vice president and director before the age of 30.

Cantalupo, who came out of retirement to become McDonald's fifth CEO in early 2003, died last month only hours before he was to address McDonald's franchisees at their biennial meeting. Cantalupo will be remembered not only for orchestrating the chain's recent turnaround after only 16 months on the job but also for engineering McDonald's biggest international expansions, in the late 1980s and early 1990s.