business news in context, analysis with attitude

by Kevin Coupe

Yesterday, we reported on Monday's announcement that Gary Millerchip was stepping down as Kroger's CFO after more than 15 years with the company, to join a then-unnamed company as its new CFO.

Shortly thereafter, the name of that company was made public:  Costco.

The timing, to say the least, was interesting - Millerchip had been identified by Kroger CEO Rodney McMullen as the person who would be his second-in-command at a combined Kroger-Albertsons entity, assuming that the $24.6 billion deal is able to get necessary regulatory approvals.  But now he was leaving - and joining the company that essentially was identified as one of three - the others being Walmart and Amazon - that were making Kroger's acquisition of Albertsons necessary for it to be competitive.

It would not be an understatement to say that this prompted a lot of emails to MNB, and subsequent conversation that focused on a number of questions.  Let me delineate them here.

(I've reached out to Kroger to pose some of these questions, but have been told that the company has "nothing to share here at this time.")

•  Why was Kroger not protected by a non-compete clause that would have prevented Millerchip from going to Costco, as well as a number of other named competitors?

•  Is it possible that Kroger does not have non-compete agreements with its senior executives?  (Note:  Sources tell me that Costco does not mandate such agreements for it senior people, the feeling being that the company is so stable and the culture so positive that nobody will want to leave.  And they rarely do.)

•  If Kroger does have non-compete agreements with its senior executives, is it possible that those agreements only specify retailers seen as direct competition - and Costco, for whatever reason, is not one of those companies?  (if this were the case, it would be a major fail on Kroger's part, not least because it has identified Costco's dominance in grocery as one of the reasons it must merge with Albertsons.)

•  Are members of Kroger's board and major shareholders asking questions about how the company could lose its CFO to a major competitor right in the middle of a major acquisition move?

•  What kinds of questions are being asked at Albertsons' headquarters, and by its board and majority shareholders?

•  Did Millerchip look at the current situation and the possibility of an extended court fight to get the merger approved, and then the reality of how hard the job of merging the two companies would be in coming years, and simply decide that the grass was greener in Issaquah than it was in Cincinnati?

•  Is it possible that Millerchip was seen within Kroger as not being a wartime consigliere?  After all, even Tom Hagen was moved our of the consigliere role when the family went to the mattresses.

I'm sure that there are a bunch more questions that MNB readers and I have not yet considered. 

But I can say this for sure - there was a lot of shock within the industry yesterday when Millerchip's new job was announced.

It is possible, of course, that the questions we are asking are much ado about nothing, that this was just a case of a senior executive getting an offer he couldn't refuse.

But the timing is fascinating, and questions are being asked.

The answers have the potential of being Eye-Openers.

And I have one more question for all the business leaders reading MNB this morning:  Are your critical executives covered by non-compete agreements?