The accidental CEO $ CEO

She was never groomed to be the boss. But Anne Mulcahy is bringing Xerox1 back from the dead2. Moments before Anne Mulcahy's an¬nual meeting began, one of her board members did something that rarely, if ever, happened during the endless business inferno3 at Xerox. Something that three years of debt downgrades, sunrise conference calls with the auditors, missed Junior High ball games, constant layoffs, and always, always, the threat of bankruptcy had not done: He made Mulcahy cry. The director was John Pepper, former CEO of Procter & Gamble. " I never thought I would be proud to have my name associated with this company again," he told her. "I was wrong. "

At almost every turn, Mulcahy had to ignore conventional wisdom. 4Xerox is an old-fashioned company, the sort of place where workers still have retirement parties and retirees Tag Heuer Replica Watches still have reunions. The average tenure of a Xerox employee is 14 years, double the overall corporate average. When the CEO of one of Mulcahy's biggest lenders said she would have to kill the culture5 to succeed, Mulcahy shot back, "I am the culture. If I can't figure out how to bring the culture with me, I'm the wrong person for the job. "

She appealed to employees with missionary zeal6, in videos and in person— what Burns called a "laying on of hands7. " She implored them to "save each dollar as if it were your own. " She ended every appearance with a nudge; "Remember, by my calculations, there are [she fills in the number] selling days left in the quarter. " She rewarded those who stuck it out not only by re-fusing to abolish raises but with symbolic gestures as well; last year she gave all employees their birthdays off. 8

If Mulcahy ever thought bankruptcy was an option, she never let on9. She dug in her heels every time the workout advisors brought it up. " A lot of people will try to convince you that there are advantages to Chapter 11," she says. " I was like, ' Don't even go there. ' Whatever you think the advantages are from a financial standpoint, I think they are dismal and demoralizing for a company that wants desperately to turn around and regain its reputation. " Joe Mancini says some of the early meetings got so tense that he thought the workout experts might "go away and not be our advisors." Basically, he recalls, they didn't think Mulcahy had the balls to take the draconian actions needed to keep Xerox afloat.10 But she did. In June 2001 she shut down the desktop division; these were people she had hired and a business she had created. " There was no good script," she says. "The company was in a lot of trouble. They weren't the ones accountable for the problem. You couldn't follow a string of logic for them." The only thing she could do, she says, "was to take the hit personally. I hung out, walked the halls, and told them I was sorry."

In the fall Mulcahy made a presentation to Xerox's 56 bankers, assuring them that the company would pay back its $7 billion revolving credit. She had never faced a crowd so hostile. When she concluded her address she was met with deadly silence. "Man, what does it take to get a smile out of these guys?" she asked, taking her seat. Between clenched teeth the banker next to her replied: "Seven billion dollars. "

She also resolved Xerox's accounting scandal. Soon after becoming CEO, she replaced her auditors and cleaned house in the finance department. In April 2002, Xerox agreed to a record $ 10 million fine to settle charges that it de-fraudedlO investors by improperly accelerating revenues, overstated earnings by using "cookie-jar" reserves, and disguised loans as asset sales, among oth¬er things. The SEC also rebuked the company for being uncooperative. Xerox did not admit or deny wrongdoing, but the settlement pained Mulcahy. She says she was never questioned, subpoenaed, or deposed by the SEC11, bd Hublot Replica Watches has been named as a defendant in several shareholder lawsuits. (In early June former CEOs Allaire and Thoman and four other former Xerox executives set tied individual SEC charges that between 1997 and 2000 they used improper accounting to defraud investors. Although they neither admitted nor deni« wrongdoing, they agreed to pay more than $22 million in penalties am fines.)

Mulcahy knows her battle isn't over. She worries about "sustaining the enef^ and intensity of the place." With CEO credibility tenuous, she takes nothinj for granted. She doesn't feel entitled, not even on the corporate jet. "This isl bag-carrying environment," says Mulcahy, who not only carries her own bt becomes a flight attendant the minute the seatbelt sign goes off (Xerox laid o the real one). Beer? Wine? Soft drinks?" she asks, handing out napkins. * cook more here than I do at home," she adds.

All companies go through cycles, but only great companies come out stronger. Mulcahy's goal, having brought Xerox back from the dead, is to make it' great again. "There is something about resilience12," she says. "The ability to address issues, to keep brands and heritages and jobs in place. I keep hoping that's the story that will emerge here. If this company becomes great again, that's a good story. "

It would be more than that. It would be a major miracle.