In 1981, a seemingly ordinary man named Darwin E. Smith was named chief executive of Kimberly-Clark, a stodgy old paper company whose stock had fallen 36% behind the general market over the previous 20 years. Smith, the company’s mild-mannered in-house lawyer, wasn’t so sure the board had made the right choice a feeling that was reinforced when a Kimberly-Clark director pulled him aside and reminded him that he lacked some of the qualifications for the position. But CEO he was, and CEO he remained for 20 years.
What a 20 years it was. In that period, Smith created a stunning transformation at Kimberly-Clark, turning it into the leading consumer paper-products company in the world. Under his stewardship, the company beat its rivals Scott Paper and Procter & Gamble. And in doing so, Kimberly-Clark generated cumulative stock returns that were 4.1 times greater than those of the general market, outperforming venerable companies such as Hewlett-Packard, 3M, Coca-Cola, and General Electric. As noted in a Harvard Business Review article, Kimberly-Clark is one of eleven companies on the Fortune 500 since 1975 that has been elevated from good to great and has maintained its transformed status. Mr. Smith was recognized for making this accomplishment possible.
Mr. Smith achieved this transformation by building strength within the company. He redefined and raised corporate goals. To reach this end he persistently examined the company’s leadership group, winnowing those who did not meet his specifications and promoting those who did. Mr. Smith also increased the geographical diversification of Kimberly-Clark’s facilities. The emphasis he placed on consumer products was exemplified by the money he allotted to research and development ($111 million in 1987) and his decision not to give up on the fledgling diaper business, against much opposition. His vision helped lead HUGGIES® diapers to its rank as the number 1 brand in the country today.
Additionally, he...