Management Turnover as Change Agent

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.

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