Management Changes - Weekly Recap

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The penultimate week of May began with an engineering giant and a pharmaceutical king reporting changes at their top level on Sunday. The tempo was maintained almost all through the week, with companies from as varied sectors as hotel and education finance lender to goggle maker and nutritional supplement seller, reporting management shake-ups.

Siemens AG said Peter Loscher, a Merck executive, would join the company as chief executive, putting an end to speculation as to who would succeed Klaus Kleinfeld, who is leaving when a probe is on into bribe charges by certain company officials. It is for the first time that Siemens is appointing its chief from outside the company.

Drug maker Pfizer Inc. on Sunday revealed the departure of its research chief John LaMattina and chief finance officer Alan Levin. The development is being viewed as an attempt by the company, which is suffering from an unimpressive new product line, to push new blood.

As expected, hotel giant Hilton Hotels Corp. promoted its operating chief Matthew Hart to the post of chief executive officer, effective early 2008. Hart, a long-time executive at the company and a trusted hand of the outgoing CEO Stephen Bollenbach, is expected to continue the initiatives that his predecessor began.

Other companies that reported executive-level changes included ITT Corp., SLM Corp., Black Box Corp. and Herbalife Ltd.

Siemens names Merck executive Peter Loscher CEO

Siemens AG (SI), Europe's biggest engineering firm, on Sunday said Peter Loscher, who most recently served pharmaceutical giant Merck & Co. Inc. (MRK), has been appointed as its new President and Chief Executive Officer, effective May 20. He will replace Klaus Kleinfeld, the current President and Chief Executive Officer of Siemens. SI stock that closed Friday's regular trade at $125.15, opened Monday's session at $124.71, but closed lower at $124.20 on 675,800 shares.

At an extra-ordinary meeting held in Munich, Siemens also decided to elect Loscher as a full member of its managing board. Loscher was previously President of Merck's Global Human Health division as well as a member of the company's Executive Committee. Loscher began his career with management consultancy Keinbaum & Partner of Germany in 1985. From 1988 to 2002, he worked with Hoechst AG in varying capacities. He has also worked with Aventis Pharma and General Electric.

Kleinfeld announced on April 25 that he would not be available to renew the contract that expires on September 30. However, the date of departure was later advanced. Kleinfeld's exit, who was at the helm for three years, is being viewed in the context of the recent corruption charges against the company that it paid more than $500 million in bribes to foreign officials to win contracts. Six past or present executives of the company are already accused in the case.

In an effort to salvage the company's image, Kleinfeld initiated a restructuring and hired a law firm and anti-corruption specialists to advise the management. Known as a task master, during his service, he brought many ailing divisions back to profit. He has said he knew nothing about the fictitious consultancy contracts at the telecommunications division.

49- year-old Loscher will be the first chief at Siemens who does not have prior experience at the 160-year-old company. And he will have the unenviable task of resurrecting the reputation of the company.

On Tuesday a federal judge in Chicago ruled that the company's subsidiary Siemens Medical Solutions USA Inc. should pay $2.5 million in fines and restitution as punishment for criminal conduct related to its 2000 bid for a government contract. The company had pleaded guilty in February to obstruction of justice.

Bloomberg reported Morgan Stanley analyst Ben Uglow as saying that investors would be relieved about Loescher's appointment as it ends the power vacuum at Siemens. Siemens had earlier projected Linde AG Chief Executive Officer Wolfgang Reitzle as its next chief executive. Haniel & Cie. GmbH's Chief Eckhard Cordes, RWE AG CEO Harry Roels, General Motors Corp.'s European Chief Carl-Peter Forster and Erich Reinhardt, who heads Siemens's medical technology unit were also speculated to be candidates for the post.

Pfizer research chief, CFO to leave

Drug manufacturer Pfizer Inc. (PFE) on Sunday said John LaMattina, President of Pfizer global research and development, would retire by year-end, after serving the company for 30 years. The company also announced the departure of finance chief Alan Levin in pursuit of other career opportunities. The company would initiate an external as well as internal search to identify a successor for 57-year-old LaMattina, who leads Pfizer's 12,500-strong research team.

Shares of the company closed Monday's regular trade 2 cents lower at $27.42 on a volume of 42.62 million. In the extended trade, the stock dropped 13 cents more and traded at $27.29.

The drug maker is suffering from lack of impressive new product line, as it is facing patent expirations for several of its revenue spinners. It is estimated that by 2011, Pfizer stands to lose $20 billion in revenue due to expiry of patents and generic competition.

Recently, the company received a setback when its promising experimental drug for cholesterol pill torcetrapib failed due to concerns of elevated blood pressure as well as ineffectiveness in lowering cholesterol.

The company's Chief Executive Officer Jeffrey Kindler, who assumed office last year after his predecessor Hank McKinnell was ousted, has initiated a restructuring plan involving job cuts and executive replacements. Bloomberg quotes Paul Diggle, a London-based Nomura Code analyst, as saying that the latest move was probably an attempt to push new blood as the company has got stuck.

Deutsche Bank analyst Barbara Ryan in a note said Pfizer would probably look for a finance chief who is highly credentialed and has significant visibility with investors. Levin had a low profile on Wall Street, with investor meetings and analysts' calls being addressed by his predecessor David Shedlarz, who became vice chairman and was one of Kindler's closest advisers.

ITT names Denise Ramos finance chief

ITT Corp. (ITT), the world's biggest maker of military night-vision goggles, on Monday reported the appointment of Denise Ramos as Chief Financial Officer, effective July 1. She replaces George Minnich, 57, who is retiring.

Later on the day, brokerage Matrix USA raised the company's stock to ``Buy'' from ``Hold''. The stock began the day's regular trade at $66.52 and closed 13 cents higher at $66.65 on 688,500 shares.

50-year-old Ramos was most recently chief financial officer of Furniture Brands International Inc. (FBN). She has also served Yum Brands Inc. (YUM), Atlantic Richfield Co.

The outgoing CFO, Minnich, joined ITT as Senior Vice President and CFO, effective July 1, 2005. Prior to joining ITT, he served as Vice president and CFO of Otis Elevator Co. From 1996 to 2001, Minnich was vice president and finance chief of Carrier Corp., a sister division of United Technologies. He joined United Technologies as Vice President and Corporate Controller in 1993.

Sallie Mae chief executive Thomas Fitzpatrick To Leave

Bowing to pressure from an investor group led by J.C. Flowers & Co. that is acquiring the company in a $25 billion deal, education finance provider SLM Corp. (SLM), commonly known as Sallie Mae, on Tuesday announced the departure of Thomas Fitzpatrick, its chief executive for two years. C.E. Andrews, the company's executive vice president and chief financial officer, will succeed Fitzpatrick. SLM closed Tuesday's regular trade higher by 6 cents or 0.11% at $55.36 on 2.06 million shares. In the extended period, the company further gained 44 cents and traded at $55.80.

Fitzpatrick's resignation came as a surprise as the private equity group had earlier said that it would retain the present management. The company said the board and Fitzpatrick reached a mutual agreement over the weekend.

The company will pay Fitzpatrick $4.1 million in cash and bonuses, as well as stock options. In addition, he will get a cash payment of $3.2 million and a $945,000 pro-rated bonus. He is likely to get an additional payment of $8.1 million, depending on a federal tax ruling. Fitzpatrick will also receive accelerated restricted stock units valued at $11.9 million, accelerated unvested stock options worth $8.4 million and a $271,400 annual retirement benefit.

Bloomberg reported U.S. Representative George Miller of California as saying that the payments were ``outsized.'' Miller's House Education and Labor Committee is investigating the $85 billion-a- year student loan industry, where some lenders influenced colleges and student-aid overseers to gain business. SLM is the target of at least two investigations. In April, the company agreed to pay $2 million and adopt a new code of conduct in an accord with Cuomo, which forbids lenders from offering inducements to schools or their financial-aid officials. Last month, the company said the Securities and Exchange Commission is probing the trading in the company's stock in the proposed acquisition.

Andrews served accounting firm Arthur Andersen LLP from 1974 to 2002, and joined Sallie Mae five years ago. He was appointed finance chief in February 2006.

Black Box CEO Fred Young steps down

Black Box Corp. (BBOX), a designer and builder of data and voice infrastructure systems, on Tuesday revealed the resignation of Fred Young as Chief Executive Officer and a member of the Board of Directors. The company's stock, which dropped 6.7% after the news was out, closed Tuesday's regular trade at $35.65, down from the previous close of $38.20, on 721,700 shares. The shares have lost 21% in the last year.

The company said until a successor is found for Young, Black Box would be governed by Chairman Thomas Greig, interim CEO Terry Blakemore, Chief Financial Officer Michael McAndrew and Senior Vice President Francis Wertheimber.

Though the company did not provide a reason for Young's departure, it is widely perceived that his abrupt resignation could be due to the internal investigation of the company's stock option practices, as well as its resultant inability to file third quarter results, which nearly saw its stock off the Nasdaq market.

In November, John Anderson, a shareholder of the company, filed a lawsuit related to stock option grants against Black Box and 14 executives and board members, which included Young. While it said eight of the 14 defendants sold more than $26.8 million in Black Box shares, obtained significantly through back-dating, Young was named as having received more than $13.1 million from selling Black Box stock.

The probe reviewed the company's stock option practices as far back as 1992 and Black Box said last month that additional non-cash, pre-tax charges for stock-based compensation expenses related to options would amount to about $63 million.

On May 23, analyst Daniel Scalzi at Matrix USA raised BBOX to ``Buy'' from ``Hold'', said Bloomberg.

Herbalife CEO Michael Johnson named chairman too

Herbalife Ltd. (HLF), a seller of nutritional and weight-loss supplements, on Wednesday said its Chief Executive Officer Michael Johnson has been elected chairman of the board. The company's stock dropped $0.28 to reach $39.91 before the news was released. The stock has added 6.8% in the past 12 months.

Johnson replaces Peter Castleman, who resigned to focus on other business activities. David Halbert, a board member, also stepped down for the same reason.

In April, Herbalife avoided a $2.7 billion takeover from Whitney & Co., its largest shareholder then, because it considered the bid insufficient. Castleman is managing partner of private equity firm J.H. Whitney, while Halbert is founder and chairman of Caris Ltd., a privately-held investment partnership.

Hilton Hotels elevates Matthew Hart to CEO

In an expected move, Hilton Hotels Corp. (HLT), the second- largest U.S. hotel company, on Wednesday elevated its president and chief operating officer Matthew Hart to the post of chief executive officer. He will succeed Stephen Bollenbach, who is retiring December 31, but will remain as co-chairman through 2010.

The company's stock closed the day's regular trade down $0.84 or 2.4% at $33.54. The shares have dropped 3.9% this year.

54-year-old Hart will be the company's fourth CEO in Hilton's history of nearly 90 years after Conrad Hilton, Barron Hilton and Bollenbach. He will take charge at the beginning of 2008. A longtime lieutenant to Bollenbach, Hart will retain the title of president.

Hart joined the company in 1996 as executive vice president and finance chief and was named president and chief operating officer in 2004. He, along with Bollenbach, bought U.K.-based Hilton Group Plc in February 2006 for $5.7 billion, which gave the company access to international markets for the first time since 1966.

Bloomberg quoted Felicia Kantor Hendrix, an analyst at Lehman Brothers Holdings Inc., as saying that the announcement came as no surprise. Since Hart has been with the company for so long, it takes away a lot of risk.

According to Michael Paladino, an analyst at Fitch Ratings, it is important to maintain the continuity of the management, said Bloomberg. Keeping it internal and keeping the internal initiatives going is positive, the report added.

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