The Government’s Favorite Recruiter

By JOANN S. LUBLIN

Executive-recruiting firm Spencer Stuart has become the go-to recruiter when Uncle Sam wants bailed-out companies to install new directors and other top officials.

Earlier this week, troubled insurer American International Group Inc. tapped Robert Benmosche as its new chief executive — the latest high-profile crisis-manager placement handled by Spencer Stuart. The search firm also helped AIG find six directors in the spring.

Thomas Neff

Similarly, Spencer Stuart matched up General Motors Co. with Edward E. Whitacre Jr., who completed his first board meeting Tuesday as chairman of the newly restructured auto maker. And Spencer Stuart recently recruited C. Robert Kidder to become chairman of Chrysler Group LLC.

All told, Spencer Stuart is helping reshape the boards of seven big U.S. businesses that accepted significant federal bailouts, including Citigroup Inc., Freddie Mac, Fannie Mae, GM and GMAC Inc.

The string of placements reflects the New York firm’s strong position in U.S. director searches and the way it is plugged in to government officials, who several times have turned to Spencer Stuart as they took big stakes in troubled companies over the past year. Its near-lock on searches for companies receiving taxpayer dollars also is ruffling feathers among rival recruiters.Spencer Stuart’s work at government-aided companies began last fall, after the government seized Freddie Mac. The big mortgage company tapped Spencer Stuart to help find six board members because the recruiter had handled previous hunts for Freddie directors, recalls John Koskinen, Freddie Mac chairman.

“They gave us a wide range of very qualified people,” though “not everybody said yes,” Mr. Koskinen says. Three of six new Freddie Mac directors announced in December came from Spencer Stuart’s list, Mr. Koskinen adds.

As for AIG’s CEO assignment, Spencer Stuart was chosen because the recruiters “were already up to speed,” says someone close to the situation.Thomas J. Neff, Spencer Stuart’s 71-year-old U.S. chairman and top CEO recruiter, is a pivotal player. Mr. Neff, who joined the firm in 1976, has handled more than 150 CEO and more than 350 board searches, including the appointments of Boeing Co. CEO Jim McNerney and Morgan Stanley CEO John Mack.

Mr. Neff also helped recruit Treasury Secretary Timothy Geithner to be president of the New York Federal Reserve in 2003.

Ennis Knupp & Associates, a Chicago pension consultant, helped the Treasury line up a recruiter to find new directors for GMAC as that company transformed into a bank-holding company, according to a Treasury spokesman. Treasury had the right to appoint two board members as part of GMAC’s aid. Ennis Knupp held a competitive “shootout” among several search firms, then recommended Spencer Stuart. The choice had “nothing” to do with Mr. Geithner’s prior interaction with Mr. Neff, the Treasury spokesman says. Ennis Knupp declined comment. The government picks joined the GMAC board in May.

The third-largest U.S. search firm by revenue, Spencer Stuart generated revenue of $267.8 million last year, according to market researcher Kennedy Information.Spencer Stuart conducts at least half of all board searches by Fortune 500 companies, estimates David Lord, a consultant in Harrisville, N.H., who counsels companies about choosing recruiters. Spencer Stuart employs 329 recruiters and conducted more than 400 board searches world-wide last year, according to its Web site.

Gerard Roche, senior chairman of rival firm Heidrick & Struggles International Inc., concedes “a whole lot of jealousy” about Spencer Stuart’s board searches for federally assisted concerns.

Some other competitors privately express dismay that Spencer Stuart has handled so many board assignments from bailed-out concerns. Work “done by individuals who are no longer there” helped establish Spencer Stuart’s role in director hunts, another rival grouses.

The depressed state of the executive-search industry undoubtedly fuels such envy. Half of 330 recruiters expect their business to drop by more than 30% this year, concludes a late May survey by Executive Recruiter News, a Kennedy Information newsletter.

Aides for Mr. Neff and Julie Daum, who heads the firm’s 40-person North American board practice, said the two were unavailable for comment.

At GM, interim Chairman Kent Kresa had planned to rely on his professional network to conduct the company’s director search. But Treasury officials this spring “strongly” suggested that he use Spencer Stuart, a person close to the matter previously said. A spokeswoman said Wednesday that Mr. Kresa wasn’t available for comment. The Treasury spokesman declined to comment.

Write to Joann S. Lublin at joann.lublin@wsj.com

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Whether your career is on hold, cruising along at full steam, or just creeping along, now is a good time to step back and think seriously about what it is that you want to get out of the considerable portion of your life that you invest in work. Discovering ways to use your skills in ways that provide you with more than just a job — a career that is both financially rewarding and personally fulfilling — is a valuable investment of time. Read the story »