ON taking up the number two job at the Jefferson Smurfit Group in June, Mr Paddy Wright will take over the day to day running of the worldwide operation. The group has sales of £3 billion, 400 manufacturing units operating in 24 countries and 42,000 employees.
Chairman and chief executive Dr Michael Smurfit will concentrate on strategy and on the future development of the group. Finance director Mr Ray Curran will be in control of the finance function. Mr Wright and Mr Curran will both report to Dr Smurfit.
There was no surprise among institutional investors at yesterday's announcement. The appointment of Mr Wright had been expected for some time.
But the move streamlines the Smurfit management structure as the industry moves into another cyclical downturn.
It can only improve effectiveness and efficiency by separating two vital functions which, up to now, have been controlled by Dr Smurfit with the back up of the executive committee - the day to day running of the group and planning its strategic development.
Mr Wright has the operational experience to run the day to day business of an international group, freeing Dr Smurfit to concentrate on strategy for future development.
The management and structure of the group has changed over the years, reflecting its rapid growth and its widening geographic spread of interests. But last year, after former president and chief operations director Mr Howard Kilroy retired, the market was sceptical about the appointment of an executive committee to assist Dr Smurfit in running the group.
As chief executive for Ireland and Britain, Mr Wright is a member of the 11 strong committee which includes finance director Mr Ray Curran, the vice president for world sales and marketing Mr David Austen, the other three group regional chief executives and the four regional operations directors.
One fund manager criticised the change "in a structure that has served the company well" - the combination of Dr Smurfit as chairman and Mr Kilroy as president and chief operations director.
"If it was felt there was nobody within the group to replace Howard Kilroy then Smurfit. It is big enough and international enough to hire somebody from outside," he said.
While Dr Smurfit said he was under no pressure from institutional investors to make an appointment or to split the roles of chairman and chief executive which he holds, some fund managers had called indirectly for a replacement for Mr Kilroy. Standard Life wrote to Dr Smurfit highlighting corporate governance guidelines, a key feature of which is the separation of the roles of chairman and chief executive.
It would now appear Dr Smurfit tried more than 2 1/2 years ago to maintain the old structure when he asked Mr Wright to replace Mr Kilroy. But Mr Wright was unable at the time, "for personal reasons", to take on the job.
Dr Smurfit also looked outside the group for a suitable replacement before the 11 strong committee was put in place, he said yesterday. He failed, he said, to find anyone who would fit the group culture.
After record profits of £420 million in 1995, profits are expected to fall this year and in 1997 as the industry deals' with overcapacity, weak demand and falling product prices.
Mr Wright agreed yesterday that the next two years would be difficult. "The industry is a cyclical one and the next two years will see us consolidating our operations. It will be my job to manage a challenging trading environment and to ensure that we exploit to the full any opportunities that present themselves worldwide. I am excited by the prospect and look forward to the future with confidence."
Dr Smurfit said yesterday he would be "very surprised" if the US economy did not improve in coming quarters. However, the industry problem is that linerboard capacity is greater than that required even when the economy is strong. It would take about two years to work through that problem, he forecast.
If Smurfit's US competitor, International Paper, could make its June $50 (£32) a ton price rise stick, this could stop the downward price spiral, he said. But Dr Smurfit considered a September price rise more likely.
