George T. Shaheen stepped down as chief executive and managing partner of Andersen, ending a 30-year career marked by controversy. The 55-year-old executive will become president and CEO of Webvan Group Inc. The Internet startup, based in Foster City, Calif., handles online grocery and drugstore deliveries to consumers.
Shaheen will replace Louis H. Borders, Webvan's founder and current chief,
who remains chairman. "My choice would have been to retire sometime next year," Shaheen said in a statement. "However, this new opportunity required that I
move up my decision, and, as a result, the timing was not under my control."
Compensation a big factor The dapper-dressing Shaheen, known for his fiery temperament and
impatience with subordinates, has been frustrated in recent years watching
clients' executives become millionaires many times over from stock options,
acquaintances say.
News of his departure hit consulting rivals like a thunderbolt. "That's a
shock," said David Nestor, a spokesman for PricewaterhouseCoopers.
For Shaheen, who didn't return calls, and Webvan, the timing is perfect.
Shaheen will take charge of a truly tiny enterprise. Webvan had revenue of
just $395,000 and a net loss of $33.5 million during this year's first half.
Begun in December 1996, the concern began shipping everything from toothpaste to
tuna steaks to the public last May.
A rancorous fight Webvan uses a fleet of refrigerated delivery trucks to provide same-day or
next-day delivery of items ordered online.
Shaheen's mark on Andersen runs deep. In 1989, Big Five accounting and
consulting firm Arthur Andersen set up Andersen Consulting as a separate unit at
Shaheen's urging. Both are now units of Geneva-based Andersen Worldwide.
Eight years later, Shaheen entered into a bitter, unprecedented breakup
battle with Arthur Andersen by filing a divorce request with the International
Chamber of Commerce in Paris, an international arbitration panel. Arthur
Andersen says Andersen Consulting must pay Arthur Andersen a steep $10 billion
breakup fee if it wants to leave, among other things.
It has been a rancorous fight. The companies separated their technology and
financial systems, even down to the security cards issued for admission into
their respective buildings.
Tried to thwart takeover
Colleagues say he worried that an
influx of new accounting partners at Arthur would ruin Andersen Consulting's
breakup effort. (Arthur later dropped the acquisition attempt.)
Final hearings on the arbitration case are to begin Oct. 25 in a New York
hotel. Shaheen is due to testify.
His departure has "changed the dynamics of
the whole situation," one Arthur Andersen executive says. "He's been the guy
who's been driving this whole thing."
In a statement, Kelly said he feels
"very confident about the outlook for the arbitration we are concluding with Andersen Worldwide and Arthur Andersen."
Ironically, Shaheen's exit also comes at a time when he had been seriously mulling an IPO for Andersen Consulting.
Some staffers relieved Under his stewardship, Andersen Consulting achieved record annual revenue
growth. Revenue is expected to top $9 billion this year, up from $8.3 billion in
1998.
During Shaheen's reign, the consulting company also revamped the digital
plumbing used by more than 5,000 businesses.
In recent years, the firm has
focused on electronic commerce, teaching companies how to do business online --
for as much as $700 an hour, per partner.
Shaheen also relaunched the
Andersen Consulting brand, which included the first redesign of its logotype since 1989.
Had denied rumors
The firm has an annual 17 percent turnover rate -- which Shaheen himself used to
bemoan.
"This (departure) speaks volumes about the pull of Internet startups and about
the economic rewards potentially associated with those businesses for
heavyweight founders," says Scott Hartz, global managing partner of
PricewaterhouseCoopers's consulting division.
Though specifics of Shaheen's compensation couldn't be learned, joining
Webvan could bring the executive an oversize grocery cart of stock-option
wealth. The potential is so huge that "he just couldn't ignore it," one Andersen
insider says.
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Face-off: Webvan vs Peapod
Webvan currently operates only in the San Francisco Bay area, where Shaheen lives. But last month, it signed a $1 billion construction accord with
Bechtel Group Corp. to build big, automated warehouses in 26 major U.S. markets.
Although he initially denied it, Shaheen even tried to thwart Arthur's
attempt to acquire the Canadian division of rival KPMG Peat Marwick by writing a
letter to KPMG Canada opposing the move.
Some firm staffers are relieved. They feared his disposition would put off institutional investors.
In recent months, Shaheen repeatedly denied rumors that he was stepping
down, saying he was committed to running Andersen Consulting. Yet now he follows
in the footsteps of many former associates who left to join Internet startups.
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