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Who Killed Kindler? Wall Street and Pfizer's Board Emerge as Suspects

Jeff Kindler may want the world to believe his Greta Garbo act -- I want to be alone (to spend more time with my family)! -- but the events surrounding the sudden, mysterious departure of the Pfizer (PFE) CEO after less than five years on the job suggest otherwise.

It's unlikely that Kindler went willingly because his resignation happened without warning on a Sunday night. If this was Kindler's idea, he would have informed the board and a succession plan would have been announced, possibly preceded by a search for a replacement. Instead, Pfizer's board tapped global president Ian Read, who is older than Kindler and was already up to speed in the company. It's not that Read isn't qualified -- it's that Pfizer didn't have time to find out if he was the most qualified for the job.

So who killed Kindler? The tea leaves suggest that he finally lost the confidence of his board after sustained pressure from Wall Street analysts, some of whom are positively celebrating his departure:

Jami Rubin, Goldman Sachs: We are delighted to see the board taking action as PFE's share price continues to underperform amid a flurry of questions about strategic direction, including capital allocation, pipeline, emerging markets, M&A, and the branded-generics strategy.
"Investors have not been happy about the stock price," said Les Funtleyder, a portfolio manager at Miller Tabak & Co. in New York, in a telephone interview. "Could he have done better? Yeah. He could have focused on buying more innovative, smaller companies."
Funtleyder's comment suggests that this is more than just "I don't like the price." It's a repudiation of Kindler's entire corporate strategy. The answer to Pfizer's problems was not a single transformative buyout -- i.e. Wyeth -- but a succession of smaller ones that would have garnered the company individual drugs with proven earning potential. Here's a list of companies that have been in play, to a greater or lesser extent, in the last four years, all of which Pfizer could have bought: Allergan (AGN), Sepracor, Genzyme (GENZ), Genentech, and Elan (ELN). The recession drove the prices of all of them to historic lows, and all but Allergan have been locked up by Pfizer's rivals.

But mere pressure from Wall Street ought not to be enough to topple someone of Kindler's stature. He also appears to have annoyed his directors:

Kindler has in recent months lost the support of some executives frustrated with the company's performance, said the person, who declined to be named because the board deliberations were private. (Bloomberg)
Barbara Ryan of Deutsche Bank: "he hasn't necessarily gotten broad support from all of Pfizer's shareholders, which include external directors."
Tim Anderson, Bernstein Research: "The departure is sudden but I doubt there was one event per se that caused Kindler's [retirement] ... [it is] highly likely he was pushed."
A symptom of that lack of confidence can be found in the $75 million compliance fund the board set up recently to prevent illegal activity at the company. Pfizer signed a corporate integrity agreement with the Department of Justice following the $2.3 billion Bextra settlement. Then, to settle a shareholder suit on the same allegations, Pfizer last week agreed to set up a compliance committee, a majority of whose members will be independent directors and not Pfizer executives.

Taken together, the two settlements are doubly embarrassing for Kindler because they happened on his watch and because Kindler is a lawyer, and thus was more cognizant of his liabilities than non-attorney CEOs. The fact that the board now wants direct oversight into compliance issues suggests that it was not satisfied with the quality of mere executive oversight -- which was Kindler's job.


Image of Garbo from Lenox Publicity.
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