Newspaper article THE JOURNAL RECORD

A New Chief Quits, and Shareholders Wonder Why

Newspaper article THE JOURNAL RECORD

A New Chief Quits, and Shareholders Wonder Why

Article excerpt

Ronald LeMay's sudden resignation as chief executive of Waste Management left the company in turmoil, but that is not the main thing bothering owners of the company's stock. What has really unnerved them is not knowing why he left after less than four months on the job.

The abrupt turn of events, highly unusual for an executive of any big company, smacked of a story untold -- and LeMay was not telling it.

"There's this question of `What did this guy see that made him leave?'" said Leone Young, an analyst with Smith Barney. The shock of LeMay's resignation reverberated through Wall Street Thursday, as many people asked the same question. "I was chin-on-the- floor surprised," said Barry Mannis of Goldman, Sachs. In what amounted to a shareholder vote of no confidence, shares of Waste Management, the trash-hauling company based in Oak Brook, Ill., fell $5.75, to $23.25, on Thursday, a 20 percent decline. It was the most active stock with volume of 36 million shares, more than 10 times the daily average. LeMay was already back at his old No. 2 position as president and chief operating officer of Sprint on Thursday, hours after he announced his resignation on Wednesday night. Waste Management, meanwhile, spent much of Thursday exercising damage control. It immediately named Robert Miller, an outside director with a reputation as a formidable turnaround artist, as acting chairman and chief executive, and appointed a search committee to find a permanent replacement. It also promised to seek an outside chief financial officer, something shareholders have long demanded. Miller held a brief conference call with analysts Thursday afternoon to reassure them that the company was not paralyzed. "We have to make some tough decisions about fleet management, about centralizing purchasing, about standardizing our service levels," Miller said in an interview. "We won't sit around for months without making those decisions." The promise of action, however, may not assuage investors. Most analysts attribute the selloff to fears that LeMay's resignation was prompted by unpleasant surprises. Indeed, last week Waste Management released third quarter earnings of just $172 million, well below the $240 million in the quarter a year earlier. At the same time, the company said that last year's third quarter earnings had included asset sales, insurance settlements and other sources of income that had not been flagged as nonrecurring items. "They've always had so many hidden charges that even Dean Buntrock admitted that no one believed the numbers," said Nell Minow, a principal with the investment partnership Lens, referring to Waste Management's former chairman. In what is unlikely to be a coincidence, John Sanford, Waste Management's chief financial officer, also resigned on Wednesday. …

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