Medical device maker Boston Scientific Corp. (NYSE: BSX) has named a new president who will take over on October 17th and who will then be elevated to CEO on November 1, 2012. Was Boston Scientific’s board dozing when it agreed to this?
The lucky guy is Michael Mahoney, who is currently Worldwide Chairman of the Medical Device and Diagnostics group at Johnson & Johnson (NYSE: JNJ). Between Mahoney’s October start date and his November 2012 ascension to the CEO suite, Hank Kucheman who is president of Boston Scientific’s largest group will be the interim CEO. Current CEO Ray Elliott announced in May that he would retire, but he will remain available through the end of the year for consultation with Mahoney and Kucheman.
Mahoney’s hiring was apparently contested by J&J and that’s why his start date as CEO has been pushed out more than a year. According to the Boston Scientific press release, the “transition period is being implemented to accommodate Mahoney’s post-employment obligations to Johnson & Johnson, which both Boston Scientific and Johnson & Johnson have agreed is appropriate.” J&J probably thinks it’s more appropriate than does Boston Scientific.
Boston Scientific is betting that Mr. Mahoney is worth waiting another year for. J&J has essentially found a way to keep him hostage for a year, which is probably enough time for Boston Scientific to foul things up even more than they already are.
The company is the world leading maker of coronary stents, a business that J&J dropped because of problems with the devices. Abbott Laboratories (NYSE: ABT) is the other big maker of stents.
Boston Scientific’s problems are well-known. The $28 billion, 2006 acquisition of Guidant Corp. ended a fierce struggle with J&J over control of Guidant. Boston Scientific is still trying to deal with that “win.” The company announced layoffs of an additional 1,200-1,400 workers earlier this year and is on our list of the 2011 Layoff Kings.
Boston Scientific’s board of directors has failed shareholders here. Mr. Mahoney may indeed walk on water, but having to wait for a year for him to prove it is too long for the company. Over the past two years, Boston Scientific’s shares have lost about -45% of their value. Retiring CEO Elliott has been at the helm for two years. And the board keeps him around to give advice to the new guys?
Going back to 2006, Boston Scientific’s stock is down more than -60%. And the board is satisfied to wait another year? Sometimes reality is far stranger than it needs to be.
Paul Ausick
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