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[Music]
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[Music]
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so um Ed welcome to knowledge of Wharton
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we're going to talk about your rather uh
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amazing career you worked at General
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instruments you were number two the
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president of Motorola for the last 10
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years you've run Tao I'm going to begin
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in the middle of um all the above you
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were number two at Motorola Tao got into
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a lot of trouble with malens at the top
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you were recruited to come in as the
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chief executive at the end of July
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02 and as I recall you're in your office
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at Motorola knowing that at the end of
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the day you're going to be announced as
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the new chief executive of Tao then a
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company of almost a qu million employees
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huge Enterprise and across the Ticker on
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the screen on your desk it said Tao to
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declare bankruptcy so picking up on that
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tell us about that day and then as you
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went to New York and took the rains on
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that following Monday with all the uh
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extraordinary attention to the malfant
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of the people who are running Tao the
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fact that it was a huge company with
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businesses all over the world you did
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have to take control had to take charge
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talk us through that transition
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well the day that that uh I think that
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was a Thursday Late July uh that came
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across the screen that Tao was uh
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looking at declaring bankruptcy uh it it
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just showed me what was about to happen
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as I entered into this new career
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because it was just chaos for the first
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months and events were like that every
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day um but you know what what was kind
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of scary about that uh when that did
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occur or at least those the talk about
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it occurred is the stock really
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continued to plunge and if I remember
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the numbers right um on that day
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specifically the stock had opened around
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$12 and ended the day around $8 a share
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so that's a huge percentage drop uh in a
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company that's already got a lot of
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other chaos going on around it so um so
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that was the backdrop to I guess a
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couple hours later my announcement
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coming out that I was taking over as
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chairman and CEO of the company um you
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know and I went in I started I was going
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to take a week off and uh I was advised
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by many people including the outside
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lawyer at Tao you better not there's not
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time here uh so I started got got back
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from Chicago started the uh next Monday
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um it it was sort of surreal uh because
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when you go into a crisis situation like
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that and especially crisis like this one
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at Tao uh one of your concerns is who
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can you trust who can you rely on and
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here I am in an environment around a
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corporate team obviously a lot of them
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knew what was going on because you can't
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pull off the shenanigans that happened
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without other people helping you so uh
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to me that was a big concern day one how
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did I work my way through uh that
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situation who could I trust and how
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could I start to rebuild uh the team at
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Tao as quickly as I could let me ask
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about that because within so many months
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of the 300 top people at Tao some 290
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were gone and within eight months the
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board that had hired you itself was gone
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and talk us through why you made that
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almost a complete house cleaning at the
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top both in management and the board
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looking back on that also do you have
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any regrets such that you would have
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done it a bit differently yeah you know
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I've been asked that question a lot and
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and there are different ways to handle
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it but I I I came to the conclusion very
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quickly with with what occurred at Tao
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um there was no one that was going to
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believe this was a different company if
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it wasn't a different management team
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and a different board uh so what really
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helped me to give you one example is we
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had five or six agencies investigating
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us well how do you go to the justice
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department or the SEC and say look we
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really are a different company and we're
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going to manage differently if the board
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of directors isn't different than the
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group that had been there before so by
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there's a lot of nice people on that
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board and to this day I actually talked
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to most of them still uh but it wasn't
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the right thing to do for them to stay
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so I came to that conclusion very early
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on and you know everyone said gez Ed you
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can't do that it's never happened in
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Corporate America before no board has
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stepped down
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uh together and uh you know there's
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always first and it was the right thing
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to do it was a clean break and you could
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honestly look someone in the eyes and
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say this is going to be a different
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company and we're going to run it
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different and on top management why
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wholesale house cleaning over the next
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six months you know most a lot of senior
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people in a company especially a
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conglomerate the size of Tao reside at
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the corporate office you know so you
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have your old Tax Group your treasury
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group your Accounting Group your
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controllership group um and I you know
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within day said they they know what
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happened here and they were complicit in
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some way in it in my opinion and you
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know if you can't have people around you
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you're not going to trust that aren't
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your team players so I didn't have time
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to figure out that I get everyone right
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um or not I just decided we had to
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rebuild every Department basically from
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scratch and that I would do it over you
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know pretty much the first year because
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you can't just ask everyone to walk out
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the door you can't run a company uh but
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you over about a year maybe a year and a
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half period of time uh you know we
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turned the whole team over and hired who
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we wanted on our team along that line
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several of your directors resisting
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exiting the board did argue that there
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was going to be a lot of tacd
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information lost if they all left in all
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the top management left since everybody
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did leave um how impactful was it to
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have almost nobody there left that knew
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all the informal things that are not
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written down but are critical for any
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company to operate yeah one of the
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things we did um one of the compromises
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we had and I thought it was a very good
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compromise was that we would keep two
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directors from the prior board to
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transition for one year with the new Tao
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board but they weren't voting members of
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the board but they came to all the board
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meetings because you do need
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institutional knowledge you know how did
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this deal happen you know there just a
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lot of questions that can come up so we
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had a very nice transition with um two
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of the directors for that period of time
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and then what what I relied on a lot um
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was outside people to help us we had
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investment bankers in we had a
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consulting company in I had David boy
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I'd say one of the best lawyers um that
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there is um I had a a PR firm that we
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brought in so I kind of kind of called
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it rent the corporate team for a while
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and they got to know the company well
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and they helped me through the
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transition as we rehired the Departments
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but there was a fair amount of knowledge
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with them that had built up over this
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whole investigative period the time to
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convince Attorneys General for states
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that were thinking about possibly
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inditing Tao to convince the big
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institutional holders that you had
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really transformed governance at
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Tao uh you made a whole range of changes
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such that in the estimate of one of the
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rating agencies you went from worst to
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First took a couple years to do that
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working with you you had a lead director
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named Jack croll he had a senior VP for
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corporate governance Eric pilmore the
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three of you really remade governance at
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Tao what was the essence of the Remake
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what got in the way what are some of the
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lessons coming out of that particular
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set of events to remake governance at
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the time yeah you know what was exciting
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about it is we kind of got to take the
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book clean again and rewrite it and we
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came up with all our own governance
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principles and we really researched what
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are the best practices and we picked
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them from different companies so uh we
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really I think picked the best Solutions
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um kind of stated the art Solutions in
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about there and by way over 10 years
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we've continued to add things to our
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governance policies and procedures um
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that I think have been very impactful
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and yeah I I think you're right we had a
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uh one of the firms that rate shown
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governance rated us with only a handful
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of companies with a 10 score um you know
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a few years after I was there but but a
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few of the things we did which at the
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time were very unique was we had actual
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positions in the company report directly
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to the board and not to me so for
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instance we had Eric pilmore who was a
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head of corporate governance and by way
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most companies didn't have a head of
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corporate governance just as one example
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but the second part of that is we had
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Eric report to the board of directors we
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had the head of our audit committee
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report to the audit committee and we had
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our OD budsman report to the audit
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committee so you know you look at well
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what happened to Tao and some of the
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other companies that blew up with some
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of the Malin there was no system around
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the C the the CEO who was all powerful
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and in our case we changed that by
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reporting structures as one key example
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I think many more companies have done
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that nowadays but back then that was
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very unique yeah that was a lot of the
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hard work in the first 12 or 18 months
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you had a huge U debt coming due 11
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billion due in January February the
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coming year within a year or so you
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would
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stabilized uh cash flow became regular a
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lot of the all the investigations were
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behind you 10 years later now your
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executive chair of the board um looking
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back in those 10 years crisis stability
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you've gone through a couple breakups of
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Tao as well of all the big decisions
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you've made which one are you most proud
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of looking back over the 10 years as
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chief executive well I I don't know if
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it's I guess the most
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rewarding uh one would be um saving Tao
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um it really got close um we didn't know
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it we saved it really till the second
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week of January so I'd been there 6
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months
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uh when we did I think at the time was
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the largest convertible Bond offering
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ever done and then I at that night I
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realized wow people are behind us they
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want to invest in the company and they
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just gave us the breathing room now to
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go fix all these issues I that was the
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most proud I'd say the most difficult
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decision which I'm extremely proud of
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also is taking Tao and making six
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companies out of it five are public one
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is private and all the companies are
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doing extremely well um and all trading
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at alltime highs and and uh you know I
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think it was absolutely the right
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strategy for the company but that's not
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an easy decision to make let's think
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about what made for that ability to get
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through an extraordinary period looking
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back to your time before you came to Tao
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maybe even much earlier in your career
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is there an individual or maybe even a
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couple that helped you become the person
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you are a mentor a coach somebody that
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influenced your life and you know I was
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I think very fortunate at a young age um
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I was at General instrument uh the the
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largest supplier of cable technology to
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the cable the the N cable industry just
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growing so I grew up around all these
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entrepreneurs that cre created these big
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media companies John Malone he owned a
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part of GI he invested with me uh back
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in the late 9s the Roberts family at
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comc um my great mentor Frank drendle
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who's run comp scope for 40 years um and
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these were entrepreneurs and what I
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learned from them and I I think I've
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taken forward um through my career was
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they they were very decisive they
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studied things but they had to make a
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decision the Bold big decisions that
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need to be made and I've watched a lot
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of management they can't make the big
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decisions and they drag and delay and
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there's always a competitor crawling
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right behind you wanting to pass you and
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uh I think that was a great experience
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for me in my 20s and then you know the
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one that sort of then built on that was
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we took GI private with Ted forcan
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Forceman little one of the great private
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Equity firms and when you learn in a
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private situation is every decision
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ision it's almost like it's your company
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what do you want to do with your company
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and it's an interesting way to look at
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it you know you don't worry about every
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constituency it's our company and I've
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always tried to keep that in mind when I
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make the big difficult decisions is this
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what Ed Breen really thinks needs to be
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done for the company pretend it's mine
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and to some extent it is and you know
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not worry about well what what are they
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this group going to think this investor
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group what are the debt holders going to
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think what I always try to think purely
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what is the right decision and the right
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decision at the end end of the day is um
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what creates long-term sustainable
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shareholder value and if you keep that
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line at the tip of your tongue when you
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make a decision you're generally going
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to have some pretty good results and
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let's pick up on net I like you to
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describe if you wouldn't mind a moment
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of decision a time when your leadership
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was on the line maybe a tao maybe at GI
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maybe at
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Motorola pick a moment that best
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exemplifies your leadership how you
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approach things just describe it
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interpret it for us well I I'll give you
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um let's take GI I think and by way in a
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whole career I've had a 34 year career I
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was thinking through this the other day
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I've probably made 10 really big
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decisions that really really mattered
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that moved the needle in a big way and
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one was GI when uh we developed a first
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digital technology for the whole
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industry and it was too expensive for
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anyone to want to buy and everyone is
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trying to take our position away from us
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Microsoft Cisco Samsung Sony and what we
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did is decided to sell warrants in our
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company to our customers or give them to
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them if they would buy our digital set
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toop boxes from us and we locked up
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twoth thirds of the industry within a
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couple weeks the industry ended up
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owning 15% of the
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company and you know if you go back and
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look at the GI history that's what made
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the company take off we won the digital
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war and um a company that was valued at
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1.6 1.7 billion we sold to Motorola for
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18 billion so that's a situation if you
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worry about every other issue besides
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creating long-term shareholder value a
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lot of people wouldn't do that kind of
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deal um it was absolutely the right deal
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for us if I can ask where did the idea
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come to do it that way with your
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customers you know it was a small it was
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a small group of us um John Malone who
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ran the largest cable operator at the
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time which was TCI in Denver mhm um
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Frank drendle my mentor who also ran a
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cable supply business and still to this
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day is involved and uh myself um and
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with a consultation with Ted Forceman ah
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head of Forceman
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little and let me have you look back on
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your career in a little bit of a
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different way what do you know now
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especially after 10 years of Tao about
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leading private Enterprise that you
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would not necessarily have appreciated
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earlier in your career well a couple
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things I think are big um what you learn
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when you're in the top seat is there
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really are a lot of constituents you
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have when there's a big decision you
00:15:07
really got to think this through um
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again I always look at it number one is
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it going to create long-term shareholder
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value but after that is how do I address
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the employees how do I address our
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suppliers how do I address our investors
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the analyst and you just go right down
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the list there's a lot of things you
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need to think about and take into
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account uh when you make some of the big
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decisions you make and you know I think
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the other think part of this is going
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through you know people have put me in
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situations where there's a crisis I a
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big believer in from a management
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standpoint in the senior management team
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spending a lot of your time on the big
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swings the big strategy questions
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because what tends to happen when you
00:15:45
come up in a company we all fight fires
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all day the phones ringing all day we're
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sending emails this happened that
00:15:50
happened and you have to deal with those
00:15:52
things what happens to management teams
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they the wheels just keep spinning they
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don't take the time to think about the
00:15:57
big swings there's going to move the
00:15:59
needle and um I think I learned that at
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a younger age because of some of the
00:16:03
things I went through and if you focus
00:16:05
on those things will really progress
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let's turn the question on its
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head is there some aspect of leadership
00:16:13
again in your recent experience which
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turns out or some precept of leadership
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that turns out not to be as true as you
00:16:21
thought it was true or not as much
00:16:22
needed as you thought it might have been
00:16:24
needed earlier in your career is there
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anything about leadership thinking that
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turns out to be uh just not on the money
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well I I don't know if people think this
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way but but you know you can have a
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great individual and a CEO or head of a
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division um but I guess the thing I
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learned along the way you really have to
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work on talent management and people and
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their development and really care about
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your team um I always put it into a
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sports analogy sports teams talk about
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who's going to play in the next game
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that's all they talk about how do I win
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the game who's going to play and a lot
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of companies don't think like that they
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don't spend time on the people stuff and
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uh there's no one individual going to
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make a company um so I always want to
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put people around me I think are better
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than me will challenge me that can take
00:17:09
my position and by the way five of them
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have we've created Five public company
00:17:13
CEOs we didn't hire them we create you
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know we developed them I think that's
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one thing where people don't spend
00:17:20
enough time um at it I I I might
00:17:22
conclude that comment by because I know
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I would say in um recent years maybe
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because of some of the scandals you
00:17:28
people get a misimpression of a lot of
00:17:29
CEOs 99.9% of CEOs are great people they
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work hard and they think about their
00:17:35
company seven days a week um you know
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trying to do the right
00:17:40
things let's uh take that same question
00:17:43
and think about somebody who's aged 20
00:17:45
coming out of an undergraduate Business
00:17:47
program a 29-year-old MBA graduate
00:17:51
looking back again on your experience
00:17:53
what advice would you have for somebody
00:17:54
who would obviously not follow precisely
00:17:57
in your footsteps but somebody who has a
00:17:59
lot of interest in taking significant
00:18:02
responsibility in the private sector so
00:18:04
for their leadership what advice would
00:18:06
you have well I I would say a couple are
00:18:08
just kind of higher level comments um
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but I think are most important you you
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you want first of all you have to be
00:18:15
passionate about what you're going to do
00:18:17
or you're never going to get to the top
00:18:18
seat um and you see it in people you
00:18:21
know are they just doing this because
00:18:22
it's a job or they're making a lot of
00:18:23
money at it or they passionate about
00:18:25
what they're doing so I would just
00:18:27
stress to anybody coming out of school
00:18:29
do something you feel passionate about
00:18:31
cuz somehow it's going to just make you
00:18:33
bubble to the top it just is the way it
00:18:35
is and I I know that in my company is
00:18:37
what I look at and everywhere are they
00:18:38
passionate or not secondly I would say
00:18:40
kind of high level U but very important
00:18:42
is be a team player if you're not going
00:18:45
to get there individually by you know
00:18:48
not you got to be a team player especi
00:18:49
if you get to be a CEO it's all your
00:18:51
team um so you got to be a big time team
00:18:54
player and maybe the third thing I would
00:18:55
say and I'm looking back on my
00:18:57
experience raise your hand for as many
00:18:59
assignments as you can there in
00:19:01
companies there's always an extra
00:19:03
project team you keep your job you work
00:19:05
on an extra project or inter
00:19:07
departmental teams raise your hand and
00:19:09
get the experience um it's the best way
00:19:11
to move up in a company and by you get
00:19:13
known that way and what I would always
00:19:16
look and I was fortunate find a
00:19:19
mentor Ed a final question here as we
00:19:21
break off looking back at GI looking at
00:19:24
motor a looking at your ten years at Tao
00:19:29
um hundreds of Peri hundreds of moments
00:19:32
probably thousands of decisions 10 big
00:19:34
ones you said along the way here what
00:19:36
stands out as the best moment in a
00:19:40
period especially at Tao early years
00:19:42
which were grueling demanding but
00:19:45
looking back at all the above what was
00:19:47
your most outstanding most rewarding
00:19:50
best remembered
00:19:52
experience well you know it was actually
00:19:55
um very it was the six months into being
00:19:57
at Tao um we had a we were going to
00:20:00
raise money convertible Bond offering
00:20:02
and we did a conference call from our
00:20:04
boardroom and then my CFO and I were
00:20:05
going to go on a road trip for a week
00:20:06
and a half to go raise the money conjure
00:20:09
up the interest and at the end of that
00:20:11
call someone walked down my office said
00:20:13
Ed this Steel's 30 times over
00:20:16
subscribed that night uh I went out with
00:20:19
most of my team and I I remember called
00:20:21
up my wife and I said you know what
00:20:23
we're going to make it now now I have
00:20:26
the time to go fix the company put the
00:20:28
operating systems and I want hire the
00:20:30
people I want um really take our time
00:20:32
and do this thing right that to me was
00:20:35
probably the most rewarding because
00:20:36
those first six months uh yeah it was
00:20:39
tough looking in the mirror some
00:20:40
mornings a a turning point indeed yeah
00:20:42
it really was a turning point so Ed
00:20:44
Breen thank you for joining knowledge of
00:20:46
Warton today we appreciate it very much
00:20:48
thank you thank you Mike
00:20:55
[Music]
