After 34 years at the helm of the cruise company founded by his father, Micky Arison is stepping down as CEO of Carnival Corporation & plc.
Arnold W. Donald, a 12-year board member who has held leadership roles at Monsanto Company and Merisant, a producer of sweeteners, was named CEO at Arison’s suggestion. He starts July 3. Second-in-command Howard Frank, the vice chair and chief operating officer, will remain in his job.
“The reality is this has been my whole life for virtually my entire adult life,” said Arison, who will remain the company’s chairman. “I viewed it as a 24-7 job with a global business where things are happening at all hours of the day or night.”
And while plenty has happened during the last couple years under his watch — a deadly shipwreck, disabling fire, a series of technical glitches — the limelight-averse Arison has drawn criticism for making more public appearances at basketball games than cruise line crises.
The announcement came Tuesday morning as Carnival prepared to discuss second-quarter earnings — and the day after the Miami Heat, which Arison owns, celebrated back-to-back NBA championship wins with a parade in Miami. Making the week even more momentous, Arison will turn 64 on Saturday.
Despite a slight drop in revenues, from $3.54 billion to $3.48 billion, the company that owns 10 cruise brands around the world reported a $41 million profit, up from $14 million during the same time last year. Bookings for the rest of 2013 are slower than a year ago with lower prices, executives said, due largely to weakness in the Carnival Cruise Lines brand.
Headlines Tuesday suggested Arison, had been “thrown overboard,” but he said the decision to split the chairman and CEO roles had been years in the making — and was, if anything, delayed by the recent spate of cruise incidents. In the U.K, where the company is also listed, the standard model for corporate governance is to split the two roles, and U.K. shareholders have been pushing for the change.
The model has also been gaining popularity in the U.S. and Canada, said Luis Navas, vice chair of Global Governance Advisors, a consulting firm based in Miami.
“The view of governance groups is how can the CEO be truly independent and balanced in terms of meeting shareholders’ needs if he or she also is chairman of the board,” he said, adding that joint roles are usually accepted in situations where a founder or family member fills both positions.
Donald, 58, a St. Louis resident who said he plans to keep his home there, said the board did not force Arison out.
“There has never ever been any crisis of confidence, lack of confidence, anything like that in Micky’s leadership,” he said in an interview Tuesday.
The move comes in the midst of major changes at the world’s largest cruise ship company, which has been in damage control mode on and off since the January 2012 shipwreck of the Costa Concordia. This year, the disabling fire aboard the Carnival Triumph has taken a major toll on the company’s earnings, and Carnival revealed during an earnings call Tuesday that advisors have said the brand’s image might not recover for as many as three years.
“This could be a little bit of fallout from just the fact that he’s caught a lot of heat and wants somebody to be the face of the business,” said Jaime Katz, equity analyst for Morningstar in Chicago. “There was all this publicity about how he didn’t show up for any of the incidents…maybe he just realized that’s not really what he wants to do.”
Arison’s has preferred to stay behind the scenes and let the heads of individual brands handle issues publicly. Donald said he believes that fundamental approach is generally sound.
“There will be times when there needs to be the corporate face, and I’m well prepared to do that, but frankly, I think our brands are very strong unto themselves and I don’t see much deviation,” he said.
Arison’s father, Ted, founded the company in 1972. Micky Arison started working at Carnival Cruise Lines in sales, and then became reservations manager in 1974. By 1979, he was president of the company. He oversaw the shift from family-owned shop to publicly traded company, and steered the ship through acquisitions of cruise lines including Holland America Line, Cunard Line, Seabourn and Costa Cruises. Carnival cemented its place as world’s largest cruise ship company in 2003 by merging with P&O Princess Cruises.
“I’ve been doing this for 34 years,” Arison said Tuesday. “Maybe 34 is enough.”
All the while, the Arison name has been synonymous with Carnival — which made Tuesday’s announcement all the more surprising to some.
“It’s a shock to people within the industry because it’s like Carnival Corp. and Micky Arison are one,” said Mike Driscoll, editor of the weekly trade publication Cruise Week. “It’s like Santa Claus and presents at Christmas.”
But Driscoll and other observers questioned how distant Arison would be from the company in his new role. “He’s chairman of the board,” he said. “He will be very, very active and powerful.”
Katz said that with Arison still a major shareholder in the company — members of the Arison family beneficially owned about 27 percent of the company’s voting power as of January — she expects that he will still have a serious interest in making sure it stays profitable. Arison is the highest-ranking South Floridian on Forbes’ 2013 list of the world’s wealthiest, with a reported net worth of $5.7 billion.
“At first glance, to me it would seem like it would be very much business as usual, especially if Micky has his feet in the water over there,” Katz said.
For his part, Arison said he plans to be less involved in day-to-day activities. During a conference call with analysts, he said he will continue to work in areas including new ship building, but will mostly do “whatever Arnold needs” him to do.
“I’m going to be looking to Arnold to run the day-to-day corporate operation, and I may even take a couple of golf lessons,” he said during the call.
The choice of Donald, who has not been CEO of a for-profit company since he stepped down from that position at Merisant in 2003 but has served on several executive boards, came as a surprise to observers. Arison said the company did not conduct an external search.
Navas, the governance consultant, said the choice of a board member — especially one who did not plan to relocate — was unusual.
“What the message sends here is that there may not be anybody internally that they feel is qualified to be CEO and/or that they need time,” he said. “There’s just so many unknowns.”
Donald said that although he lives in St. Louis, he will go wherever needed for as long as necessary.
“I’m going to spend every second I need to, wherever I need to be,” he said. “We’ll see over time.”
He said he’s confident he will have the autonomy and independence to run the company as he sees fit, but said he is “comforted” that Arison is willing to help at any time. Donald said he doesn’t anticipate more major changes within the company, but said there are plans to add some positions.
“There is a high level of confidence in the current leadership team at the various levels of the organization,” he said. “There’s no pending, pressing need to make dramatic changes or anything like that.”
For Arison, having more time to fill will be a major change in itself. He joked that his other passion, the Miami Heat, might take up more of his time — much to the dismay of the team’s CEO, Arison’s son Nick.
“My son is nervous as hell that I’ll be bothering him at the Heat more,” Arison laughed.