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Arthur Martinez.

The former Sears chairman trades in a full time career in retailing to bring his merchandising and strategizing skills to the boardroom.

WHEN Arthur Martinez turned 61 years old in September 2000, the Sears, Roebuck & Co. chairman and CEO was only three months away from celebrating the next major chapter of his life. For in that time, the changing of the guard at Sears would take place, marking an end to his five-year tenure as head of the nation's second-largest retailer. It would be a moment Martinez had anxiously looked forward to since announcing his retirement plans earlier in the year. His new status as a retiree would give him all the time in the world to lay back and enjoy the fruits of his labor.

Spending more time with friends and family and indulging himself in long vacations at exotic resorts were certainly top retirement priorities for the Sears exec. In fact, when Directors & Boards caught up with him in February, he and his wife, along with two other couples who are longtime friends, had just returned from a three-week vacation in Fiji and New Zealand. And that's not all, as Martinez was quick to share. "We're going to Morocco in April for a couple of weeks," he declared elatedly, "and also to Alaska in September."

But retirement means more to Martinez than leisurely trips to sandy beaches and fantasy locales. When he's at home, Martinez maintains an office at Sears Tower in Chicago, and remains an active presence in the local business community as a director of Northwestern Memorial Hospital, a trustee of Northwestern University and of the Chicago Symphony Orchestra, and as a second-term chairman of the Federal Reserve Bank in Chicago.

Martinez also serves as a director of the National Retail Federation (NRF), and as chairman of its research and program development arm, the National Retail Federation Foundation. Based in Washington, D.C., the NRF is the world's largest retail trade association, whose mission is to conduct programs and services in research, education, information technology, and government affairs to advance the interests of the retailing industry. Its board has nearly 100 CEOs and senior executives. Martinez had formerly served as chairman of the NRF from 1998-2000.

Richard Sharpe, chairman of Circuit City Stores, a consumer electronics retailer, currently serves as NRF chairman. He describes Martinez as "very intelligent and charming, personality traits not always found in combination." Sharpe, who has known Martinez for nearly 15 years, adds, "His personality really came in handy when he was head of this organization. He had the ability to manage the flow of our activities effortlessly and gracefully, which is always good when you're dealing with a trade group made up of a bunch of CEOs."

Martinez says he misses the stimulation of the challenges he faced as CEO of Sears. He has chosen to remain engaged in the corporate world through his work on four public company boards, two of which he joined just weeks after his retirement. While he was chairman of Sears, he held only one outside directorship at PepsiCo, whose board he joined in 1999 and on which he continues to serve. By early December 2000, when his retirement date was near at hand, Martinez was recruited to the board of Martha Stewart Living Omnimedia, a $200 million in revenues multimedia and merchandising company. Less than two weeks following that appointment, Martinez was tapped for board service at International Flavors & Fragrances, a fragrance products company with $1 billion in annual revenues. And, in January 2001, Martinez accepted yet another directorship, this time at Liz Claiborne & Co., a $2 billion men's and women's fashion apparel manufacturer.

When asked what he hoped to bring to these boards, Martinez says a large contribution will be his knowledge of marketing strategy. But he quickly notes his belief that a board's role in its formulation should be limited. "I think that it is far more the province of management than that of the board," says Martinez. "My first meeting as a director at Liz Claiborne is this week, and I would expect that we will be briefed on marketing matters. But the execution of their strategic marketing plan is management's job, not the board's. The appropriate province of the board is to ensure that the company's management has an agreed-upon strategic plan, and to monitor that it is being implemented. That," he adds with emphasis, "is very clearly a board's responsibility."

Of the companies that make up the quartet of Martinez's directorships, the most recent one at Liz Claiborne, he notes, closely matches the retail environment that he is so familiar with, given his 20-year background in the industry. "Joining this board," says Martinez, "permits me to stay close to something that is dear to my heart, which is apparel retailing, albeit from the position of a manufacturer as opposed to a retailer. The proximity of their business to my experience made me feel very comfortable, and I felt I could add some value to their strategic thinking at the board level."

Martinez explains he was first approached by a search firm while he was still at Sears on whether he would be in a position to accept a directorship at a large, branded apparel manufacturer. "It would have been highly inappropriate for me to join their board while I was still actively employed as CEO of Sears," he says, noting that Sears carries several Liz Claiborne product lines.

His personal relationship with Liz Claiborne, however, goes much deeper. "I've known about the Liz Claiborne brand for 20 years," says Martinez, "basically the extent of my entire career in retail." And he knew the principals of the company, including Jerry Chazen, who was current Liz Claiborne CEO Paul Charron's predecessor, and "I knew Paul through his time at VF Corp., another great retailing company, before he came to Liz. So, I was very familiar with this company, its brands, and its people," says Martinez. He also points out that Charron, who became CEO at Liz Claiborne in 1995, the same year Martinez became CEO at Sears, has done "a terrific job in turning around the once ailing company."

Part of Charron's strategy, explained Martinez, was to build upon the Liz Claiborne brand name, which he says already had great brand awareness. "Today, Liz is more than just Liz," says Martinez. "It's a multibrand company."

"Paul has recreated his company to be a multichannel, multibrand supplier of brand and fashion apparel," says Martinez, "which is very intelligent strategy Ultimately there will be future global implications for that strategy, although for now it's still primarily focused on North America."

Martinez's upbeat assessment of the Liz Claiborne business is certainly affirmed by CEO Charron, who relayed to Directors & Boards when we called the company's just-released year-end results, which showed an 11% sales gain for the year, and earnings up 15% for the year. "That's very good in the fashion business," Charron was eager to point out, particularly in this environment." Referring to the jittery state of the economy, Charron says, "Whenever I read the second column of the front page of The Wall Street Journal, I get rather depressed because companies in so many industries are doing poorly, and those are the companies that are paying people to shop in our stores. To be able to knock down these kind of results, with 24 consecutive quarters of earnings gains and sales gains, is quite notable."

Charron attributes his company's success to both its management and its board, which he says takes corporate governance very seriously. "We subscribe to most if not all of the GM Principles of Corporate Governance," he says, referring to the guidelines set forth by the General Motors board in 1994. He takes great pride in the diversity of his 12-member board -- not just in its representation of gender and ethnicity, but also in the diversity of the directors' backgrounds.

Despite these strengths, Charron felt his board lacked a retailing industry presence from a CEO's perspective. "Not only did Martinez have that going for him," says Charron, "but he did a terrific job at Sears, and made it more attractive to shoppers to spend their time and money at their counters." To add to that, "Martinez is very smart," says Charron. "And, let me tell you, this guy knows strategy. He is a damned smart strategist!"

An engineer by training, Martinez began his career in finance at Exxon Corp., and later held executive positions at Talley Industries and International Paper Co. He went to RCA Corp. during the 1970s, where he stayed for 10 years. Much of his work there was focused on the entertainment and recorded music side of its business. "In a funny way," reflects Martinez," "my involvement in the music industry prepared me well for the vagaries of retailing. They're both fad businesses and quick consumer response businesses."

His transition into retailing began after he left RCA to join upscale retailer Saks Fifth Avenue in 1980, where he served in several positions, including CFO and EVP of administration, until 1984. He later joined BATUS Inc., parent company of Saks, Marshall Field's, Breuner's and other stores, where from 1987-1990 he was SVP and group chief executive of its retail division. He returned to Saks in 1990 as vice chairman, in charge of all Saks's administrative functions.

He joined Sears in 1992 as chairman and CEO of its retail unit, Sears Merchandise Group. It was there that his acumen as a corporate strategist was really put to the test. Plagued for years by falling profits and being outdone by rival discount department stores, Sears was in need of a quick fix. Retail analysts were uncertain of its future, and even rumored that it was in such bad state that it was becoming an acquisition target.

Taking drastic steps at that time to reduce costs and restore profitability, Martinez engineered the strategy that closed 113 stores and eliminated 50,000 jobs. Gone too was the revered Sears catalog, which Martinez argued was too costly to continue and yielded too little profit. Martinez streamlined Sears to focus it more on its retail business, and divested its financial services group, which included Allstate Insurance, the Dean Witter brokerage, and the Coldwell Banker real estate operation. He revitalized the store's merchandise and undertook a massive $4 billion store-renovation program. He later helped develop the "Softer Side of Sears" campaign, which targeted women consumers who, as was learned through research initiatives Martinez implemented, comprised a significant percentage of Sears' customers.

While the restructuring was painful, it paid off. In recognizing his efforts, the NRF awarded Martinez its 1998 Gold Medal Award, its most prestigious award, for what the organization heralded as "his willingness to restore and reinvent the business, pulling off what many consider to be the most stunning recovery in retail history."

"I feel lucky to have been able to persuade him to join our board," says International Flavors & Fragrances Chairman Richard Goldstein. Martinez, he says, came to his attention through one of his company's directors, Peter A. Georgescu, chairman emeritus of the Young & Rubicam advertising agency. Goldstein says he previously only had marginal knowledge about Martinez, and felt especially fortunate that there were members of his board who were helpful in recruiting him. "It's always good to have people on your board who know and have the ability to help bring in other quality individuals to the board," he says. "Recruiting Martinez proves this point. He has a superb knowledge and understanding about consumers, which is a critical discipline for our business."

In similar fashion, Martinez was recruited to Martha Stewart's board through the recommendation of one of its directors, Charlotte L. Beers, chairman of the J. Walter Thompson Worldwide advertising agency, who had worked with Martinez for years. In addition, Sharon Patrick, Martha Stewart Omnimedia's president and CEO, says, "Arthur is an old friend to both me and Martha. And we have also done business with Arthur when he was at Sears," pointing out that Sears is a big distributor of the Martha Stewart Everyday Paint brand.

"Arthur was somebody who we respected, someone we knew personally, socially, and professionally," Patrick continues. "We knew that Arthur was of top caliber. And we really needed a merchandise focus on our board. It's important to have expertise represented on your board for the businesses that you're in, particularly at the CEO level. That way you can really get the executive advice, the business advice, and the governance advice. Arthur is five-star on all those criteria."

Asked why Martinez was chosen over someone with connections to Kmart, with which Martha Stewart has an even more prominent business relationship, Patrick points out that in many ways Martinez was a better candidate. "He doesn't only come to us from Sears, but as someone who has had a long and illustrious career both in the media and merchandising business," answers Patrick. "Arthur is not representing any particular interest. He's very much in tune to the industry, and has served in various capacities -- he ran the Retail Federation and he's extremely well respected. And we were looking for somebody who had that kind of shadow in retail."

Patrick adds, "Already, he's been very helpful in talking to us about our merchandising strategy and forward growth plan, about our executive compensation, and about our company's goals and objectives. He's also come into our offices and spent another afternoon with us, just getting to know us and sharing his thoughts."

Even in his retirement, there are a lot of people who are still counting on Martinez. He is mindful of how quickly his dance card has filled. "I won't say that I'm at capacity, but I'm thinking very carefully if I want to take on any more commitments," he says. He states that he has no intentions of establishing a consulting practice, so he will be looking to his four directorships to "keep me fully engaged mentally in business." But now with more time on his hands, Martinez can pursue activities he really enjoys, such as tennis, hiking, and biking. Being retired will also give him greater opportunity to improve his golf game. "I am an avid but inept golfer with a 15 handicap," he admits, revealing a self-deprecating sense of humor. And whatever the future holds for Martinez, there is one thing of which he is certain: "As they say in the music business, there will certainly be no more full-time gigs."

Martin D. Porter is associate editor of DIRECTORS & BOARDS and editor of the Directors Roster.
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Title Annotation:Sears chairman
Publication:Directors & Boards
Article Type:Interview
Geographic Code:1USA
Date:Mar 22, 2001
Previous Article:Directors Roster.
Next Article:Patricia Barron.

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