One year in, Carnival CEO Arnold Donald is working to right the ship

From Monopoly to Monsanto, the CEO of Carnival Corp. had a lifetime of preparation for his role.

07/04/2014 6:20 PM

07/04/2014 8:45 PM

A year after stepping into the top job at Carnival Corp., Arnold Donald still doesn’t know what he was thinking when he heard the offer.

After a board member from the world’s largest cruise company called him to say that then-Chairman and CEO Micky Arison — son of the company’s founder — wanted him to take the job of president and CEO, Donald had to mull it over for a couple days. He was enjoying life: retired but busy, advising a couple of private equity firms and serving on several nonprofit and corporate boards.

“I have to be honest. Now that I’ve done it, I was an idiot,” Donald said in a recent interview. “I should have been begging for the job. It is a blast.”

Donald, 59, started the job at the Doral-based cruise giant a year ago after serving on Carnival’s board for 12 years. He was a longtime cruisegoer who took his first vacation at sea to play blackjack and had a professional background that veered closer to science, technology and agriculture than the business of leisure.

In fact, his roots in business reach all the way back to an enterprising childhood in New Orleans.

The youngest of five children born to poor but hardworking parents, Donald’s first introduction to entrepreneurship involved buying candy in large quantities and then selling pieces to his older sisters at a markup.

One of those sisters taught him to read and write before kindergarten, and Donald became a voracious reader as well as an epic Monopoly player. On weekends, the family would pile into a car and visit relatives, making the levee and sugar cane fields their playground.

“We didn’t take any other vacations,” said Donald, now a married father of three with five grandchildren (and one on the way).

Neither of his parents finished high school. Father Warren, “a rural Louisiana renaissance man,” had a job in a department store and worked as a carpenter; he built the family’s home himself. Mother Hilda, an outgoing personality who was full of ambition, took the jobs she could find, including work as a maid and schoolteacher.

They instilled a value for education and the church in their own five kids, and welcomed others as well, taking in a total of 27 foster children during Donald’s school years.

Thanks to encouragement from his family, church and schools, and inspiration from the civil rights movement and the historical figures in books he was devouring, Donald said he never lacked self-confidence: “I believed I could do whatever I wanted to do.”

Although he was black in a segregated society, Donald came of age as opportunities started to open up. When he was in eighth grade, historically black schools were finally allowed to play white schools in sports. He could march in the Mardi Gras parade for the first time.

And his Catholic high school in New Orleans, the all-black, all-boy St. Augustine, drilled high expectations into its students three times a day: “Gentlemen, prepare yourselves. You’re going to run the world.”

So amid his participation in the debate team, math competitions, marching band and jazz band (where he played the alto sax), Donald formed his own run-the-world plan. In his junior year of high school, he decided he would become a general manager in a Fortune 50 science-based global corporation — and then set about tackling the goal.

Dr. Griffin Rodgers, director of the National Institute of Diabetes and Digestive and Kidney Diseases, met Donald when both were accepted into the eighth grade class at St. Augustine in 1968. His classmate had “an encyclopedic memory,” Rodgers said, not only for his studies but also for subjects such as sports statistics and music.

High school internships, summer programs, study abroad and college degrees (in liberal arts and engineering) all led to a career at agriculture company Monsanto that lasted more than 20 years. Donald’s positions there included president of the agricultural sector and president of the consumer and nutrition sector.

In 2000, he and other investors bought Equal and other brands from Monsanto and formed Merisant, which focused on marketing the sweetener. Both jobs required Donald to evangelize on behalf of his product, whether he was trying to convince Europeans that genetically modified crops could be beneficial or persuade Sweet & Low users to switch to Equal.

“I really believed in the impact [the products] can have,” he said. “And so in that regard, it was great preparation for where I am now. I wouldn’t work with a product I didn’t believe in.”

Later jobs — president and CEO of the Juvenile Diabetes Research Foundation and head of the Executive Leadership Council, a network for African-American executives — also required an outspoken advocate.

As an ambassador now for Carnival Corp. and its 10 brands around the world, Donald finds himself making a new pitch.

“It’s bringing the world closer, it’s giving people a broader view of humanity, it’s life’s little moments,” he said. “I really believe it. I’m not a snake oil salesman.”

After starting the job last July, Donald spent months hearing from employees at the company’s 10 brands. The head of those brands have in the past been encouraged to operate with autonomy, and one of Donald’s major iniatives has been to encourage leaders across different groups to better cooperate in an effort to trim costs and grow revenue.

Karl Sestak, who has worked with Donald since both were at Monsanto — and who has a consulting agreement with Carnival — said Donald approached the executives “respecting the fact that these guys knew a lot more about the business than he did, not trying to pretend that he was coming in to make everything better.”

The drive and careful planning that Donald cultivated in his youth are still evident in his leadership at Carnival, where he is known to start discussions on a topic by asking what success would look like — and how, step by step, it can be achieved.

“Arnold is probably one of the more analytical people I’ve ever bumped into in my life,” said Alan Buckelew, who headed the Princess Cruises brand before Donald asked him to become chief operations officer of the corporate parent. “He uses in some way the Socratic method, the Arnold Donald version. He asks lots of questions.”

Donald said Arison, who remains the company’s chairman, gives him freedom to operate but remains available around the clock. He doesn’t have to be right all the time, he doesn’t have to own the decision, it doesn’t have to be his way,” Donald said.

Arison was not available to comment for this story.

Though he now works primarily in Miami, Donald has kept his home in St. Louis, where he and his wife of 40 years, Hazel, have deep roots. They also bought a condo in South Beach, and Donald said he spends more time in Miami than anywhere else. He travels frequently for the job, and spends one night a week or less in St. Louis.

While he seems comfortable representing the company at industry events, poking gentle fun at himself or rivals, he described himself as a “newbie” who doesn’t have much history yet with the leaders of competing brands.

“Nobody particularly likes me or dislikes me,” he said.

Evidence that he’s right: Through a spokeswoman, Norwegian Cruise Line CEO Kevin Sheehan said he didn’t have much to say for this story “other than Arnold seems like a nice guy and is a good dancer.”

Rodgers, the high school classmate, has kept in touch with Donald and said the Carnival job seemed a good fit for his skillset.

“He’s always been a very thoughtful and considerate guy and he really puts people very much at ease,” Rodgers said. “In the entertainment world, this is the kind of person that you need: someone who’s very smart but can kind of really put the emphasis on the customer.”

Donald’s appointment followed a difficult 18-month stretch for the cruise industry and particularly Carnival. In January of 2012, the Costa Concordia — part of Carnival-owned Costa Cruises — wrecked in Italian waters, killing 32 people. A little more than a year later, fire disabled the Carnival Triumph in the Gulf of Mexico, leading to days of constant coverage as uncomfortable passengers were towed to land.

In both cases, Arison stayed out of the public eye and let the CEOs of each brand handle the press, typical of his management style. But his behind-the-scenes role didn’t play well with many observers, and he came in for some harsh criticism.

Donald said the circumstances when he took the job required him to be a public face for the company, especially because he realized that Carnival wouldn’t get the attention it wanted without participation from the CEO.

“We needed to balance some of the stuff that was going on and the talk about us and about the incidents,” he said. “I’d rather have somebody far more attractive, far more eloquent and in many areas far more knowledgeable at it,” Donald said of the media spotlight. “For the time being, I’m what they get.”

Buckelew, the chief operations officer, said Donald considers it his job to address hype with fact and present a message of stability to shareholders and vacationers alike.

“I think he sees that as a very important part of his role as the leader of the company,” Buckelew said. “To be its principal spokesperson who’s consistently telling the same message and making sure people — whether they’re investors or passengers or people who hopefully are considering a cruise someday — can see him and maybe walk away with a different point of view of the Carnival group.”

According to a company spokesman, Donald has appeared on CNBC a number of times since his appointment, as well as Bloomberg TV, Associated Press Television News, Black Enterprise TV and CBS This Morning.

It’s a role he seems to be enjoying more than his predecessor, said Anne Kalosh, the U.S. editor of the Seatrade Cruise Review magazine and seatrade-insider.com.

“I think Arnold is very media savvy,” she said. “He’s been doing a lot of interviews – he’s been on TV, he’s been talking to print media, he talks to the trade.”

And, she noted, Kalosh said Donald also has more people working with him on communicating his key talking points to the press. “I think he’s also got a number of handlers, which is different from Micky,” she said. “They’re doing more messaging-oriented communication than Micky did.”

Analysts who follow the cruise industry say that while Donald’s higher-profile style is a welcome change, the question remains whether he will steer Carnival to success.

“Like a ship, a company takes a long time to turn around,” said Matthew Jacob, a director at ITG Investment Research. “I think it’s too early to judge whether or not he’ll end up ultimately being successful. But things seem to be generally moving in the right direction.”

Late last month, Carnival released earnings for the second fiscal quarter. While results were better than expected, the company surprised Wall Street by scaling down expectations for the third quarter. The stock price fell nearly 3 percent.

Morningstar equity analyst Jaime Katz said Donald has talked a lot about plans to take greater advantage of scale, but details and specific cost saving expectations have been scarce.

“Nothing has really happened yet since he’s been there,” she said. “It’s sort of been business as usual.”

Katz said she expects to get a better sense of how Donald might be shaping the company within the next six months.

“I think first there was certainly a lot of surprise because he hasn’t been ingrained in the industry,” she said. “There’s something sometimes positive about a fresh set of eyes.”

Donald, whose initial employment agreement was for a period of three years, said his short-term goals are clear: deliver double-digit returns on invested capital in the next three to five years. After that, he said, he and the board will see where things stand.

“I know there are a lot of people who are concerned they’re going to have to pry me out of here with a crowbar,” he said. “It is fun, I’m not kidding you.”

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