Accounting Problems Ensnare International Rectifier Execs

International Rectifier IRF (NYSE), the maker of energy management systems, announced that its CEO and director Alex Lidlow resigned October 2nd effective immediately. Lidlow had already been on a leave of absence since late August after an accounting problem appeared to become more problematic. In a regulatory filing in May this year the company stated its financial statements dating back to September 2005 "should no longer be relied upon."

As the company initiated an internal investigation top executives began to be ensnared in the issues surrounding the problems. With Lidlow's resignation the firm has already lost three top ranking management officials. According to a piece by Alex Pham in the Los Angeles Times:

Since launching its investigation, it has delayed reporting quarterly financial statements to the Securities and Exchange Commission. ...In July, the company dismissed then-Chief Financial Officer Michael McGee without explanation. At the same time, Robert Grant, executive vice president for global sales, resigned.

At the time of Lidlow's initial leave of absence the company appointed general counsel Don Dancer as interim CEO. Dancer will continue in his role as acting CEO. As part of the company strategy to resolve the accounting problems it also announced plans to appoint a lead independent director (Jack Vance) and devise a special committee of the board to advise and support the acting chief executive officer. The company also changed reporting relationships at its Japan subsidiary, where the initial problems arose, to improve oversight, and added interim processes to help assure the unit adheres to proper revenue recognition policies.

The company has also engaged Korn Ferry to assist the firm in hiring a permanent CEO. It is difficult to ascertain at this point in time whether the firm can properly right the ship and get on with its business. So far the market has indicated a positive on the management moves but time will tell. Keep an eye on both Dancer and Vance to get a feel for how they plan to get the operation working smoothly again. Make sure to check out Michele Leder's piece on footnoted.org on International Rectifier.

For more:

Footnoted.org
Los Angeles Times
EE Times
Reuters
Electronics Weekly
Forbes