Management Turnover as Change Agent

Wednesday, September 30, 2009

CEO Watch Ken Lewis, Bank of America, Update #8

It's official, Ken Lewis, Bank of America's embattled CEO announced his planned resignation for the end of the year. Lewis in a letter to Bank of America employees explained his reasons for resigning. The letter included in the WSJ's Deal Journal stated that Lewis' decision to resign was his alone and that he was not pressured to do so. Whatever the reason, his planned exit is the end of a sad chapter at the bank and hopefully the beginning of a new era for the bank, an unlilkely scenario at this point.

Tuesday, September 29, 2009

Are executives Beginning to Find Themselves Back on the Hot Seat?

Liberum Research’s executive turnover numbers do not yet show an increasing turnover trend. There are, however, more and more specific situations where CEOs and CFOs are resigning as corporate performance has lagged. Just yesterday, Silicon Image SIMG (NASDAQ) the connector chip maker’s CEO, Steve Tirado, resigned after the firm announced its third quarter revenues were expected to be much lower. We are beginning to see more and more top executives leave their positions as their respective firms have failed to perform.

Biotech Terminates CEO and Others

The board of directors of Sequenom SQMN (NASDAQ) terminated the employment of the president and CEO, Harry Stylli and Elizabeth Dragon, the SVP of R&D after an investigation into the mishandling of test data. Sequenom a biotechnology firm involved in the development of a test for Down’s Syndrome acted quickly after the results of the investigation was completed. Other employees have been affected as well including the firm’s CFO. According to story in GenomeWeb Daily News,

One Year Stock Performance of SequenomThe clear out comes following the completion of an investigation into the mishandling of R&D test data and results on the firm’s SEQureDx Down syndrome test. Sequenom disclosed the problems last April and opened an investigation at that time.

“While each of these officers and employees has denied wrongdoing, the special committee’s investigation has raised serious concerns, resulting in a loss of confidence by the independent members of the company’s board of directors in the personnel involved,” the firm said in a statement.

“In making the transition from researching potential molecular diagnostic tests to developing and commercializing those tests, the company failed to put in place adequate protocols and controls for the conduct of studies in the T21 program … and some employees failed to provide adequate supervision,” Hixson said during a conference call following the announcement. “This resulted in inadequately substantiated claims, inconsistencies and errors in the test data, and results for our T21 program.”

In a recent interview conducted by The Wall Street Transcript of Zarak Kurshid, a vice president for Caris and Company published on September 14, 2009, he said,

”We’re recommending selling Sequenom.”

According to a story by David Olmos for Bloomberg,

(The company’s) planned launch of a prenatal test for Down syndrome may be delayed by more than a year after a finding that research data gathered to develop the screen was mishandled.

Following the terminations and resignations the firm’s board according to its own SEC 8K filing,

… appointed Chairman Harry Hixson, a former president and chief operating officer of Amgen, and Director Ronald Lindsay to serve on an interim basis as CEO and SVP of R&D, respectively. The company’s board of directors also has designated controller Justin File to serve as principal financial and accounting officer.

There is likely more to come as the SEC is investigating the problems at the firm as well.

For more:


Wall Street Journal

San Diego Union Tribune

Seeking Alpha (update 9/30)

Thursday, September 24, 2009

Recommended Reading - CEOs and the Pay-for-Performance Puzzle, Business Week

Ben Steverman wrote a terrific piece in Business Week that examined the issues surrounding CEO compensation and what it means with regard to the quality and proficiency of CEOs. If you are interested in compensation issues or more importantly in CEOs and their impact on companies, it’s a must read.

Aeropostale CEO to Resign

One of few bright spots in the retailing scene Aeropostale ARO (NYSE), the teen retailer, announced today that its longtime CEO going back to 1996, Julian Geiger, would be stepping down at the end of the fiscal year (see press release). For now, the firm willJulian Geiger replace Geiger with Mindy Meads, the president and chief merchandising officer, and Thomas Johnson, the chief operating officer, who will serve as co-CEOs. Both executives have performed terrifically at the firm. It is unlikely, however, the two will remain as co-CEOs for very long. Co-CEOOne Year Stock Performance of Aeropostale, Bigcharts.coms is usually difficult arrangement under normal circumstances but it is even more problematic in a retailing situation.Keep a close eye on how this all shakes out over time. The company does not want to damage a good thing.

For more:



Businessweek (update 10/1)

Wednesday, September 23, 2009

CEO Watch List - Ken Lewis, Bank of America Update #7

Ken Lewis’ CEO chair at Bank of America continues to get hotter and hotter. It is getting more and more difficult to see how Lewis can manage to keep his position much longer. Joe Bel wrote a piece for MarketWatch Tuesday in which he stated,

The multiple probes bearing down on Bank of America Corp. could make it difficult for Chief Executive Ken Lewis to keep his job.

Numerous analysts and management experts are now predicting the when rather than the whether. Stay tuned.

Monday, September 21, 2009

Recommended Reading - Too Many No Voted to Be Ignored, The New York Times

Gretchen Morgenson, the New York Times business reporter, wrote another spot-on story in Sunday’s Business section on the need for ending what she calls the often “cozy relationships” between corporate board members and management. Morgenson’s story, Too Many ‘No’ Votes to be Ignored stated,

For years, shareholders have done little to voice complaints about such cozy relationships, but it seems that the financial fiasco of the last few years, and the lackadaisical performance by directors at major banks that contributed to the meltdown, is encouraging investors to become more vocal.

Signs of such a welcome development can be seen in the results of this year’s director elections at annual corporate meetings.

… Even with such thumbs-downs nearly doubling year-over-year, negative votes on directors still remain relatively small and suggest that investors have plenty of room for improvement if they want to make themselves heard.

… Investors are clearly angry with their companies, and they have their reasons. Director accountability to the shareholders they are supposed to serve has been sorely lacking for decades. Even as they rubber stamp risky corporate practices and excessive executive pay, directors continue to win re-election to their increasingly lucrative board seats.

Liberum has also been examining this issue over the last two years. Investors often need to be vocal about how they view management and the responsibilities of board members. Investors must also stay on top of specific board changes for they could mean a potential change in management or strategy. To get more information on the specific statistics Morgenson referred to in her story check out the study performed by Proxy Governance, Inc. entitled SHAREHOLDER VOTES OPPOSING DIRECTOR NOMINEES SHOW SHARP INCREASE IN 2009 PROXY SEASON.

Friday, September 18, 2009

LCA-Vision CEO Resigns for New Position

Steven C. Straus, the often time embattled CEO of LCA-Vision Inc. a provider of laser vision correction services, according to the company’s press release,

Steven C. Straus… resigned his position to lead another healthcare company outside of the ophthalmology industry. Management of daily operations will be the responsibility of Chief Operating OfficeLCA-Vision One Year Stock Performancer David L. Thomas and Chief Financial Officer Michael Celebrezze, jointly reporting to the board of directors through non-Executive Chairman E Anthony Woods.

Straus who has been CEO for three years has at times been under pressure from activist shareholders and subject to the weak economy. His exit from the firm may turn out to be a blessing if the company can find its way forward and put in place a CEO that understands the business and its market.Stay tuned.

For more:

Business Courier of Cincinnati

MSN Money

Thursday, September 17, 2009

Northrop Grumman CEO to Retire with Succession in Place

Northrop Grumman NOC (NYSE) chairman and CEO Ronald Sugar will retire January 1, 2010. In his place the board selected president and chief operating officer Wesley G. Bush to run the defense contractor. Sugar, who has served as the company’s CEO since 2003, has been in charge of the firm as its value has continuedRonald Sugar to increase. Now that a new administration is in place and the U.S. economy has been under intense financial and economic pressures manyWesley G. Bush defense industry firms have been working to move their operations more in line with the problems facing the United States economy. More consolidation and cost cuts can be expected over the next number of years in the defense industry. The selection of Wesley G. Bush allows for a smooth transition at the top of Northrop Grumman and the likelihood of a refocusing in the firm’s business strategy going forward.

For more:

Tuesday, September 15, 2009

Suggested Reading - Where the Jobs Are, Forbes

David Serchuk, a reporter for Forbes, wrote a story today that examined where the jobs are and where they are not. Serchuk also referred to recent research by Liberum in which we recently predicted executive turnover would begin to rise as the economy moves through the Fall and into the Winter months.

Monday, September 14, 2009

Coldwater Creek CEO Resigns, Replaced by Chairman

Coldwater Creek, Inc. CWTR (NASDAQ) the women’s retailer announced today that CEO Daniel Griesemer resigned and would be replaced immediately by chairman and co-founder Dennis Pence. He has also resignedOne Year Stock Performance of Coldwater Creek, his board position. Coldwater has been struggling, just as all other women’s retailers, during the current recession but has managed to control its inventory and stay within predictions by Wall Street. It is unclear exactly what forced the change at the top of the firm. Griesemer had been appointed CEO back in 2007. Investors should keep a close eye on the firm to get a better picture behind the change and what might be planned for the firm going forward.

For more:


Corporate Press Release

Thursday, September 10, 2009

Morgan's CEO Mack to be Replaced by Gorman in January

Late today it was announced that the often embattled Morgan Stanley MS (NYSE) CEO John Mack would be replaced in January by the firm’s c0-president James Gorman. Often considered Mack’s possible replacement, Gorman will soon be in the captain’s seat. Mack will continue as chairman. According to a Reuters story by Dan Wichins and Christian Plumb,John Mack

Morgan Stanley (MS.N) Chief Executive John Mack is stepping down and will be replaced by retail brokerage head James Gorman, signaling the storied bank is embracing stable businesses after losing big on risky ones.

… “Gorman has really earned his stripes,” said Anton Schutz, president of Mendon Capital AdvisJames Gormanors in Rochester, New York, which owns Morgan Stanley shares. “He did a great job at Merrill, he’s doing a good job at Morgan Stanley, and the timing for a change seems to be good, because we’ve made it through the worst of the crisis.”

Many of the street’s analysts are convinced the change at Morgan is related to the issues of risk the bank experienced during the financial crisis and the change at the top is intended to ameliorate that risk going forward. It may be far too early to make that kind of the prediction, we will have to wait and see.

For more:


Wall Street Journal


New York Times

Wall Street Journal

Insight Enterprise, Inc. Pushed CEO Out

Insight Enterprises, Inc’s. NSIT (NASDAQ) board Monday September 8 ousted its CEO, Richard Fennesy. Fennesy had been in charge of the firm since 2004. Insight, a distributor of computer hardware and software in North America, carrying thousands of products from major manufacturers, selected a current board member Anthony Ibarguen to serve as the firm’s Insight Enterprise One Year Stock Performanceinterim CEO until a successor is chosen. According to Insight, Ibarguen has more than 25 years of IT industry experience including serving as President, Chief Operating Officer and a director of Tech Data Corporation (TECD). Additionally, he served Executive Vice President of Sales and Marketing at Entex Information Services. He also served as President and Chief Executive Officer of Alliance Consulting Group, a privately held IT consulting and software solutions firm.According to a story by Patrick O’Grady for the Phoenix Business Journal,

co-founder and Chairman Tim Crown during a conference call said …“It was with this focus that the board determined that now is the right time to make a change in the CEO position,”

… Crown said there is no one thing that led the board to decide a change of direction is in order, but the company has been buffeted this year having to restate about $61.2 million in earnings related to accounting for certain aged transactions. The restatement involved transactions going back to 1996.

The abrupt change at Insight may augur some positive results for the firm once the dust settles and the firm focuses its business strategy. Keep a close eye on the interm CEO’s moves and the firm’s ultimate choice for a permanent CEO.

Friday, September 4, 2009

CEO Watch, Jeffrey Peek, CIT Update 1

In July as CIT continued to risk bankruptcy I placed Jeffrey Peek on Liberum’s CEO Watch list. Earlier today it was announced that CIT extended Peek’s contract for another year. In a Reuters story earlier today by Juan Lagorio,

CIT Group Inc said it has extended the contract of Chief Executive Jeffrey Peek for one year, even though his decisions to expand into risky businesses helped to push the lender to the brink of bankruptcy.

… “Keeping him (Peek) on board would minimize any distractions as the company tries to complete its restructuring,” said Sameer Gokhale, an analyst at KBW.

… “Getting a new CEO at this point in time wouldn’t really accomplish anything because the company is dealing with funding, liquidity and capital challenges, and that is not something a new CEO can fix easily,” Gokhale said.

The circumstances surrounding Peek’s contract extension are somewhat similar to many companies today. Boards remain reluctant, particularly during difficult times, to change the “captain of the ship” even while the ship is sinking or floundering. Stay tuned.

For more:


Thursday, September 3, 2009

New CEO Selected for First Solar

Robert Gillette, a former CEO of Honeywell’s Aerospace, was selected as First Solar’s FSLR (NASDAQ) new CEO. Gillette succeeds Michael Ahearn who will remain as the firm’s executive chairman. Gillette’s selection appears to be a terrific choice. Stay tuned.

For more: