The Meaning of `Personal Interests'
Commentary. David Wilson is a columnist for Bloomberg News. The opinions expressed are his own.
By David Wilson
Princeton, New Jersey, March 11 (Bloomberg) -- Gary Wendt answered a question last week that can arise whenever a company loses a top executive: When the official is leaving ``to pursue personal interests,'' what does it really mean?
The phrase appeared in a statement that Conseco Inc., the insurance and consumer-finance company run by Wendt, published last Wednesday. It was designed to explain why Chief Financial Officer Charles Chokel, who came on board less than a year ago, would no longer work for the company.
The next day, Conseco published Wendt's 20th memo to shareholders since he became chairman and chief executive officer 21 months ago. Among other things, he wrote that the company had ``said essentially nothing about Chuck's departure'' in the earlier three-paragraph release.
Wendt then resolved the issue that inevitably results from the company's choice of words: Did Chokel jump or was he pushed? Or, more precisely, did he give up his position or was he forced out of office?
``Chuck did not resign,'' the memo said. ``His employment was terminated. I let him go because I did not believe that he was up to the job.''
`Serious Questions'
Chokel joined the company, based in the Indianapolis suburb of Carmel, Indiana, in March 2001 after 23 years at Progressive Corp., the fourth-largest U.S. auto insurer. At Progressive, he was co-CEO, responsible for investments and capital management.
Wendt elaborated on Chokel's departure from Conseco after receiving ``several calls'' asking for additional information, according to the memo. The performance of the company's stock undoubtedly played a part as well.
Conseco's shares tumbled as much as 40 percent after the statement and a subsequent downgrade from a Merrill Lynch & Co. analyst, Edward Spehar. They changed hands for as little as $2.50, an 11-year low.
``A relatively new finance chief leaving a troubled company raises serious questions,'' Spehar wrote in a report. He cut his recommendation to ``reduce/sell,'' Merrill Lynch's lowest rating, from ``neutral.''
The use of ``troubled'' reflects Conseco's history of losses and need to raise cash. The company has posted net losses in seven of the last nine quarters, and has to come up with $410 million to help cover $1.28 billion in debt payments due this year.
Lack of Transition
Even if that wasn't the case, the lack of detail in the statement about Chokel would have raised the ``jump or pushed'' question. Shareholders, and most everyone else, would have been left to speculate in the absence of Wendt's memo.
That said, it was possible to reach the ``pushed'' conclusion by considering what the release didn't mention -- and what similar statements from other companies do. For instance:
-- There wasn't any suggestion of a transition period. The statement simply said that Bill Shea, Conseco's president, will serve as the acting chief financial officer until the company appoints a successor to Chokel.
Amazon.com Inc., by contrast, said in a statement last week that Warren Jenson would remain as chief financial officer ``for several months'' and help the largest Internet retailer recruit his successor before leaving. Jenson, who joined Amazon.com in September 1999, will resign later this year.
-- There wasn't any indication that Chokel would remain with Conseco in some capacity. Instead, the statement just quoted Wendt as saying what companies typically say when an executive departs: Conseco appreciated his work and wished him well.
What Interests?
For a contrast, consider a statement earlier this month by American Re Corp., which said General Counsel Robert Burgess had resigned ``to pursue other interests''
The Princeton, New Jersey-based unit of Germany's Munich Re, the largest reinsurer -- a company that assumes risks on behalf of insurance companies -- said Burgess would serve as a consultant on ``legal and other matters'' at its request.
-- There wasn't any hint about those ``personal interests'' that Chokel was supposedly going to pursue. Companies sometimes will mention them in disclosing an executive's departure.
Agilent Technologies Inc. is one example. Two weeks ago, the Palo Alto, California-based producer of testing and measurement tools for electronics said its chief operating officer, Alain Couder, would leave ``to pursue other opportunities to lead a company as chief executive officer.''
William Lyon Homes Inc., a homebuilder based in Newport Beach, California, is another. In a statement last week about the retirement of its general counsel, Nancy Harlan, the company said she ``will continue to pursue her career as an artist.''
Past as Prologue
There's one more point worth mentioning from Wendt's memo: his assumption that the statement's meaning ``would be clear'' because it lacked these kinds of details.
It's hard to understand that assumption -- especially after reviewing what General Electric Co. said about Wendt in December 1998, when it announced his departure as chairman and CEO of the GE Capital Services finance unit.
While the headline of General Electric's statement said he resigned, the first sentence spelled out what actually happened. He ``agreed to resign,'' according to the Fairfield, Connecticut- based company.
The use of ``agreed'' raises a question: Agreed with whom? Considering the source of the statement, the answer can only be: with General Electric. So it makes sense to conclude that Wendt jumped after being pushed.
Chokel didn't get an opportunity to jump. Nor did he leave ``to pursue personal interests,'' as Conseco said at first. By themselves, these words indeed mean essentially nothing when companies use them. |
