The Challenge in Parting Ways With Top Executives
Monday, April 24, 2006
No one can say for sure if Steven R. Chamberlain resigned as chairman and chief executive of Integral Systems Inc. last week under pressure or at will -- except for Chamberlain and a few others.
And so far, they're not talking.
A company filing at the Securities and Exchange Commission offers no reason for his abrupt resignation. And an e-mail from Chamberlain to company employees says only that he does not want his "publicity/legal problems" to affect the Lanham-based company now that a grand jury has indicted him on felony sexual offense charges involving a minor. Chamberlain denies the charges and faces trial on July 24 in Howard County Circuit Court.
"Please don't be sad for me," Chamberlain said in the e-mail, posted on an Internet message board and verified by a company employee. "As many of you know, I've been meaning to retire for years and it took years to find someone crazy enough to take the job!"
And with that, the man who helped create the satellite software company 24 years ago and kept it profitable every year gave up his titles. But he promised to stick around "for quite some time" while former chief operating officer Peter J. Gaffney settles in as chief executive.
The last several months have been tumultuous ones for Chamberlain and some of his fellow Washington area chief executives. In a year when chief executive departures nationally have reached record levels, a number of prominent local executives have parted ways with their companies as boards of directors have asked increasingly tough questions.
David R. Huber stepped down as chief executive of the company once known was Corvis Corp. after the company altered its core business, though he remains chairman. Dendy Young, a fixture in local technology and government contracting circles, did the same at Chantilly-based GTSI Corp. after 11 years at its helm. And William H. "Nick" Timbers Jr., the ousted founder of Bethesda-based USEC, finally settled a long-running dispute related to his dismissal.
Most separations have not been as publicly dramatic as Chamberlain's, whose professional troubles began in January after a director wrote a series of scathing letters, filed with the SEC, criticizing him for failing to promptly notify the board about the charges against him when they were first filed in June. Back then, the allegations were less serious misdemeanor charges.
But deciding it's time for the person at the top to move on comes with a set of challenges, including who initiates the change, who makes the decision, when it happens and what persuades the boss to leave.
Most companies don't want to talk about it in detail. Often, departing chief executives limit themselves to vague comments in company-issued statements. Huber, for example, said that his reduced role came at a good time for the company and would allow him to "spend more time with my family and on my other ventures," an oft-stated formulation for such departures. Young said in an interview that the board made the "right decisions" given the weakened finances of the firm and its transition to a new line of business. And Timbers said he's not allowed to talk about his departure except to say that he needed to defend his reputation.
Even a scandal like Fannie Mae's $10.8 billion in accounting errors can produce a mild outcome publicly. The mortgage giant's chief executive, Franklin D. Raines "retired" in 2004 with benefits including a full pension that a compensation consultant estimated at $1.4 million annually for life.
Whatever the reasons, experts who track executive transitions say that jobs of chief executives -- and directors -- grew much riskier since the Sarbanes-Oxley legislation became law in 2002 and held top company officials more accountable for their actions. Some directors say they are spending much more time in board meetings than they used to, and chief executives say they're trying to cope with what many describe as "shadow management" boards.