Close the Hatches, Lower the Sails - Prologis Jettisons CEO and Cuts Expenses

Prologis PLD (NYSE), the global industrial REIT considered one of the largest warehouse developers, announced a number of dramatic changes to deal with the ever growing credit crisis and its impact on the company’s share price.  The company’s CEO and chairman since 2005, Jeffrey Schwartz, resigned his positions effectively immediately.  In his place, the company appointed Walter C. Rakowich, the current President and COO, the new CEO while lead trustee, Stephen L. Feinberg was slated to take over as chairman of the board.   In addition to the major management changes the company also announced it would reduce general and administrative expenditures by 20 to 25%.  The company further announced a reduction in its slated dividend.  These key changes come after the company’s share price, according to a story by John Spence of MarketWatch,

… fell by more than half so far in November…

…The REIT sector has been crushed this year on accelerating financial problems, combined with fears over a slowing economy and retail spending. Funding for commercial real estate has dried up during the credit crunch.

The appointment of Rackowich, an employee of the firm since 1999 when he first began as the company’s CFO, makes for an easier transition.  According to Lou Taylor, Deutsche Bank analyst, cited in the MarketWatch article,

We interpret the change as a difference of opinion about future strategy. The board must believe a halt of all construction is required,” …

We will just have to wait and see how Rackowich and Feinberg manage the situation for the firm going forward.  They have at least put in place a viable strategy to conserve capital and deal with the continuing credit crisis and growing recession. 

For more:  

Bloomberg  

Forbes  

Reuters  

Globest.com 

EasyBource 

Financial Week

Recommended Reading - Bank Chiefs in Europe Face the Axe, International Herald Tribune

As the credit/financial crisis continues to fester European Bank executives seem to be finding themselves in a similar position with their counterparts in the United States who have been packing their bags for the last number of months.  According to a story by Julia Werdigier for the International Herald Tribune,

For the most part, chief executives at European banks have been able to hold on to their jobs while reporting billions of dollars of write-downs, even as they watch their U.S. counterparts clearing their desks.

But as financial markets sour and investors become increasingly concerned about further write-downs, pressure on at least two executives on the Continent is mounting.

Check out the problems bank execs in Europe seem to be facing.

Credit Crisis Inks Another Notch - Ken Thompson, CEO, Wachovia

Early in May (see previous blog) Wachovia's WB (NYSE) then CEO and Chairman Ken Thompson was forced to give up his chairmanship after the bank released dismal numbers.  The second shoe has now fallen.  Wachovia's board yesterday forced Thompson to resign his CEO post as well. According to David Mildenberg and Hugh Son of Bloomberg, 

... the board blamed him for losses that cost the lender more than half its market value in the past year. The stock fell as much as 4 percent.

Chairman Lanty Smith was appointed interim CEO, the Charlotte, North Carolina-based company said today in a statement that cited " a series of previously disclosed disappointments and setbacks'' for the change. Thompson quit at the board's request, the statement said.

Triangle Business Journal wrote in a story today in which the Jounal quoted Lanty Smith, the new interim CEO,

"no single precipitating event" - such as the disclosure of even wider losses - caused Thompson's ouster.

"... A series of previously disclosed disappointments and setbacks cumulatively have negatively impacted the company and its performance," Smith, 65, said in a prepared statement. "The board believes new leadership will help to revitalize and re-energize Wachovia and enable it to realize its potential. We will move Wachovia steadily ahead as a strong, independent company by continuing to focus first on the needs of our customers."

Under the gun, banks have been fervently trying to split the CEO and Chairmanship positions to try and allay growing unhappiness by shareholders and activists.  We will just have to see if this will be enough for Wachovia's naysayers.  Stay tuned.

For more:

Bloomberg (later in day)

Deal Zone

CNN Money

thestreet.com

Bloggingstocks.com

Wall Street Journal

MarketWatch

Charlotte.com

hingefire

Financial Times

SeekingAlpha

 

Credit Crisis - Corporate Governance = Splitting of CEO and Chairman, Wachovia

Yesterday, Wachovia WB (NYSE) took the Chairmanship away from Kennedy Thompson the bank's CEO.  The change came shortly after the company's loss was twice as large as expected.   Thompson finds himself in real hot water.  The credit crisis continues to impact the bank. According to a story by David Mildenberg for Bloomberg,

"Ken Thompson is in a very hot seat,'' said Jaime Peters, an analyst at Morningstar Inc.  "People are starting to call for his head the same way that they were calling for Chuck Prince's at Citigroup,'' Peters said, alluding to how Citigroup Inc. replaced CEO Charles O. Prince after posting a record-fourth quarter loss. Morningstar rates Wachovia at three out of five stars, similar to a hold rating, she said.

The bank's lead independent director, Lanty Smith, assumed the chairman's position.  While the change meets with standard governance requirements, I am skeptical it will make a real difference in the running of the bank.   Smith is known as a recent supporter of Thompson. According to story by Rick Rothacker in the Charlotte Observer,

The change elevates a director who has stood behind Thompson in recent weeks -- and who has also faced criticism himself. The shift comes at a critical time for Thompson, the bank's CEO since 2000 and a fixture on the Charlotte civic scene.

Smith has said in recent weeks that Thompson has the board's full backing. The bank said neither was available for comment Thursday. Asked whether the move signaled any change in the board's confidence in Thompson, Phillips-Brown noted that he maintains all of his duties running the company.

In his role as lead independent director, Smith assisted the chairman, approved meeting agendas, served as a liaison between independent directors and ran any meetings in which the chairman wasn't present. Now, as non-executive chairman, he will be in charge of all board matters and preside over its meetings.

Smith has served on the board since 1987, taking the lead director spot in 2000. He is also chairman and CEO of a Raleigh merchant bank. While Thompson has absorbed most of the heat during the bank's recent travails, Smith also has come under attack.

The only good news for Thompson is he is smart enough to read the tea leaves and can be expected to work hard to save himself and the bank.  The splitting of the chairmanship and CEO positions in this situation is just window dressing and should give Thompson more time to save himself.  According to a story in the Atlanta Business Journal,

Nell Minow, co-founder of The Corporate Library, a research firm specializing in corporate governance, said proposals to split the chairman and CEO roles often come up at companies that have encountered problems.

"In companies where the shareholders have lost some confidence, that is one of the go-to strategies for change," she said. "It's a way for shareholders to begin a very important conversation. It gets people's attention.

We will just have to wait and see what happens over the next few months.

For more:

Reuters

AP

Wall Street Journal

Credit Crunch Phase Two CEO Changes?

In my previous blog, I recommended David Weidner's Market Watch story examining the shaky circumstances the CEOs from GE, WAMU and Wachovia face with regard to their long term status at their respective firms. This morning's, Deal Zone from Reuters mentions the possibility that Fred Goodwin, The Royal Bank of Scotland's highly respected CEO might also be at risk for his job.  According to Adam Pasick of Deal Zone,

Royal Bank of Scotland is set to announce a rights issue to raise as much as $20 billion next week, an industry source told Reuters ...

... It could also mark the end of an era for the bank’s well-respected chief executive, Fred Goodwin, whom analysts and shareholders say would face an uphill struggle to push through a hefty capital increase and remain in the job.

While I think Goodwin might manage to stay in place, we may be in store for a new round of CEO and CFO changes as the credit crisis continues to take more bites out of earnings.  Stay tuned.

For more:

BBC

International Herald Tribune