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The Challenge in Parting Ways With Top Executives
Surprises or changes can throw people off guard, said Leslie Gaines-Ross, chief knowledge and research officer at Burson-Marsteller, a New York-based public relations firm. "It's just a very difficult time for CEOs."
Their departures reached record levels last year at the Fortune 1000 companies, she said. A survey by her group found that turnover increased 126 percent in the chief executive ranks from 2000, when 57 chief executives left, to 129 in 2005.
It's tough to pinpoint how many were forced out because many leave without explanation. But once in a while, a firm boots its chief executive in a very public way for practical reasons, said Constance E. Helfat, a corporate strategy pRofessor at Dartmouth College's Tuck School of Business.
"If a company is doing poorly, then disruption may be good because you need a clear signal that 'we're going to change,' " Helfat said.
And sometimes the board doesn't have a choice, which can lead to costly battles such as the one involving Timbers, who led the uranium enrichment company called USEC for a decade and disputed the reasons for his dismissal in 2004.
Those reasons were never made public and both sides decided to arbitrate. In February, USEC agreed to pay Timbers $14.5 million in cash to settle the dispute and to cancel an outstanding $300,000 loan to him.
"The only thing that you have is your reputation, and any time someone disparages your reputation you have a responsibility and interest to go out and defend it," Timbers said in an interview last week.
Some board members say their reputation is also at stake if they fail to rein in a rogue chief executive or address perceived corporate governance lapses.
That's why a longtime director at Integral, Bonnie K. Wachtel, said she went public with her take on the politics and corporate governance issues at the company in a series of letters that questioned the chief executive's judgment. From there, the saga that ultimately led to Chamberlain's resignation last week unfolded. In the letters, Wachtel declined to stand for re-election and advocated for the company's sale, an option Integral is now exploring.
But as the Integral drama demonstrates, it's difficult to control all aspects of the outcome when a director challenges a chief executive.
"I want the company sold," said Wachtel, a shareholder who joined Integral's board in 1988, when her District-based securities brokerage firm managed Integral's initial public offering. "I never wanted to see (Chamberlain) step down from the board."