By: Carter Copeland
Many years ago, I had a friend tell a CEO over dinner that he was certain that the CEO alone accounted for a $2 billion drag on the company’s value. That comment came during the appetizer course so you can imagine how awkward the next 90 minutes were. That CEO was Wes Bush’s predecessor, and that dinner came shortly before Bush’s promotion at NOC to President and COO, a move prompted by an attempt from BAE Systems to lure him away. Looking back on it, that promotion and Bush’s subsequent ascension to the CEO role were arguably the best decisions made by any Board of Directors in the Defense world over the last decade and a half (see Figure 1 for the staggering TSR during the Bush tenure). Watching Wes Bush plan to leave at year-end marks the end of an era, and leaves our heads spinning as it gives us and other big believers in NOC many things to consider. From a high-level, we think Wes will have an impact on NOC’s performance and reputation that doesn’t go away quickly, but also isn’t as ironclad as we think many folks want to believe today. Furthermore, the investor mindset and framework for how we think NOC will be evaluated looking forward will grow to be different – more sober in intent and demanding of data/information, raising the bar for further outperformance at a time when operational challenges are not insignificant. We see nothing urgent worth overreacting to, but several factors to monitor closely as the transition evolves.