This morning Wright Medical Group Inc., the $520 million (revenue) manufacturer of extremity and large joint implants, announced that its popular and well regarded CEO, Gary D. Henley, CEO since 2006, had abruptly resigned “without good reason” before a meeting called to discuss management’s oversight of the company’s ongoing compliance program.
Because Henley’s resignation is occurring “without good reason” he does not qualify, according to this morning’s press release, for severance. Furthermore, in the same release, the company announced that the firm’s Chief Technology Officer Frank S. Bono, was terminated for “failing to exhibit appropriate regard for the company’s ongoing compliance program.” What’s that mean?
Wright Medical’s employees, apparently, are learning about these changes from the press release that was issued this morning. As they and the rest of the orthopedic industry try to digest the stunning news, Wall Street’s analysts are already speculating that the cause of these abrupt changes are tied to the firms ongoing Department of Justice investigation.
Wright fell 10% to $15.38 at 9:32 a.m. in Nasdaq Stock Market composite trading, after touching $15.28 for the biggest intraday decline since April, 28, 2009.
Last September 30, Wright Medical joined a long list of orthopedic firms that agreed to settle claims brought by the Department of Justice which accused companies of inducing doctors to use their devices through the mechanism of medical consulting programs. Prosecutors had agreed to drop Wright Medical’s case in 12 months if an independent monitor agreed that Wright has reformed the way the company hires its medical consultants.
The press release and the way this is all being handled is stunning and implies that the monitor had something to do with the abrupt departures of CEO Henley and CTO Bono. Losing, in our view, such veteran and well regarded managers raises questions not only about the departed employees but also about the way this was handled and the people who caused this outcome.
In its press announcement this morning, the company said that the management changes were not related to its operational performance, financial condition or financial reporting. Furthermore, the company reiterated that its first quarter 2011 adjusted earnings per share* (both including and excluding non-cash stock based expense) and revenue, when reported, will be in line with current consensus estimates.
The Board of Directors has formed a committee comprised of Directors David D. Stevens, Robert J. Quillinan, Lawrence W. Hamilton and John L. Miclot to undertake a search for a permanent CEO. Stevens has asked not to be considered for the permanent CEO position but will serve as interim CEO until the selection process is completed. Candidates from both inside and outside the company will be considered.
Said Stevens; “I look forward to leading the company on an interim basis and working with my fellow directors to identify a permanent CEO. Given my experience as Chairman of Wright Medical, and previously as CEO of Accredo Health Group, Inc., I am very familiar with both this company and the industry. I am impressed by the depth and talent of the senior leadership team, and will work closely with them to ensure that our success continues. Wright Medical is committed to maintaining the highest standards of ethical conduct and to complying strictly with the laws and regulations that govern our business practices.”
Stay tuned, for sure.
