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Cement giant responds swiftly to fourth-gen CEO death

By Michael Finnigan

A swift change of leadership at Mexican company Cemex following the sudden death of its fourth-generation chief executive and chairman last week highlights the importance of a solid corporate governance structure, says a family business expert.

Lorenzo Zambrano’s death from a heart attack in Madrid last Monday left directors with the task of replacing the man responsible for transforming Cemex’s regional operation into a global business.

Just four days after his death, however, Cemex released a statement announcing that Rogelio Zambrano Lozano, 57, cousin to the late CEO and a Cemex board member, would become chairman of the board, signalling some much needed stability.

The company’s chief financial officer Fernando Gonzalez, 59, was promoted to chief executive officer.

Rob Lachenauer, chief executive of Banyan Family Business Advisors, says under Zambrano’s tenure Cemex installed a sophisticated corporate governance structure. This included an independent board and corporate practices committee, whose responsibilities include the hiring, firing and compensation of chief executive officers allowing Cemex to act “quickly and decisively in appointing a new chairman and CEO,” Lachenauer says.

However, he adds that planning for unexpected leadership transitions is regularly poor, stating that humans often “assume we are immortal “.

“Unlike Cemex, many family-controlled businesses lack a fiduciary board of directors with independent members, which is essential if you want to ensure the selection of the next CEO is merit-based and not influenced by family politics.”
When it comes to the family, Lachenauer says the death of a controlling patriarch or matriarch can trigger two profound changes: a transfer of ownership and disputes among the next generation.

“If unplanned for, the transfer of ownership can result in estate taxes that can be so taxing that it requires ownership changes -- like the guy on The Price is Right who wins a fancy new car but has to sell the vehicle to pay for the taxes.

“Likewise, when the next generation are behaviourally freed of the patriarch's presence, latent family disputes often become uncapped at a time when the business faces the most risk.”

The newly appointed chief executive officer of Cemex, Fernando Gonzalez, has already laid the foundations for the company’s future during his first meeting with reporters after Zambrano’s death.

“We’re 100% focused on recovering our investment-grade rating,” said Gonzalez. “Nothing we do can be out of line with that goal.”

The company lost its investment-grade rating during the global financial crisis and were forced to sell assets, refinance approximately $15 billion in debt and lay off 10% of its work force.  

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