CEO's Axed Left & Right, Who's Next? (BSC, SBUX, MMC, AMD, CC, BSX, FINL, CFC)

It seems that all of a sudden corporations are deciding to do the right thing by getting rid CEO’s that have put the companies and shareholders in untenable positions.

We called CEO James Donald of Starbucks (NASDAQ: SBUX) last week as a CEO that needs to replaced by founder Howard Schultz.  Yesterday that happened.

Yesterday evening there were also reports from CNBC, The WSJ, The Financial Times, CNN, and many others that James Cayne (Jimmy) was being replaced as CEO at Bear Stearns (NYSE: BSC).  He was our replacement in December for another CEO who got the ax so we’d still have our 10 CEO’s TO GO FOR 2008.  At midnight EST there was no official statement from the company but these reports when this widespread are almost never "an oops" where everyone is wrong (even if Dewey didn’t really win).  It appears that Cayne is staying on as Chairman, but keep in mind he’s in his 70’s.

Cherkasky of March & McLennan (NYSE: MMC) was the one that was fired in December and he was one of our 10 CEO’s to go, and one of the top ones. 

But we comprised a list of "actionable events" where a CEO being fired or "retiring" would likely act as cause for a stock rally so long as the companies have a replacement and action plan in place.  Bear Stearns shares were down 3% again Monday, but rose 2.3% in after-hours. We aren’t just trying to point out CEO’s, and we even gave a GUIDELINE FOR CEO’s TO GO.  We looked for stocks where we think new leadership would propel the shares.  So here is a summary of CEO’s we still believe need the ax headed their way:

• We believe that Angelo Mozilo of Countrywide Financial (NYSE: CFC) will retire as CEO this year, but he’ll probably retain the Chairman role.
• Alan Cohen of Finish Line (NASDAQ: FINL) is one we have been against for some time now and this was before the last blow-up that we saw coming.  He has screwed the common shareholder situation now so bad that viability is an actual concern and trying to use their balance sheet or valuations is irrelevant.  He’s gotta pay. Just one problem though: he’s dug in deep with voting control because of a dual class of stock. He needs to go get a pair of running shoes at an East Coast store and go on a Forrest Gump endless run.
• Gary Pruitt of McClatchy (NYSE: MNI) is responsible for heading up the acquisition of Knight-Ridder, and the stock has never been the same since.  The balance sheet is now more leveraged and his old glory days are long gone.  It is hard to blame a CEO in the newspaper business for much turmoil now because it is systematic, but this is currently the worst in the lot.  Here’s the full scoop on that one.
• James Tobin of Boston Scientific (NYSE: BSX) is a CEO in the middle of  giant quagmire.  Not all of the problems at the company are his issue alone, but they are the worst performer in their sector and this acquisition of Guidant was such a dud that the BSX-GDT combined company is now worth less than Boston Scientific was before it went after Guidant.  Here’s the rest.

There is also a whole slew of technology companies in need of a new regime. Here are the 247WallSt.com Technology CEO’s Who Need to Go in 2008 (ALU, AMD, BBND, CC, SYMC).  Out of these two we can’t decide which one of two is more deserving to get the ax nor which will be the first one marched out.  Hector Ruiz of Advanced Micro Devices (NYSE: AMD) and Philip Schoonover of Circuit City (NYSE: CC) have done in their hearts what the best thing and their efforts and leadership ended up being the bomb.  Military pilots turned investors would say their tenable positions are now FUBAR.  They should both meet on the golf course this weekend and see which one can score a better exit package.  Ruiz will probably have a better exit package as his pay with options is potentially huge.  Both of these guys are probably done.

If you want a potential list of other CEO’s or key managers that could face choppy waters you can see our master list of TURNAROUNDS THAT HAVEN’T TURNED AROUND.

Join our open email list to hear previews about other management changes, value stocks, special situations, IPO’s, restructuring, M&A, merger-arb spreads, and more.

Jon C. Ogg
January 8, 2008