Shad Out, Saul In as Drexel Chief; Board Is Revamped
Drexel Burnham Lambert Group, in bankruptcy proceedings, announced Wednesday that its board is being reorganized to give outsiders a majority and said John S. R. Shad had stepped down as chairman.
Ralph S. Saul, a current Drexel board member and former chairman of Cigna Corp., was elected to succeed Shad, who will remain on the board as an outside director.
Drexel also announced management changes that will consolidate the power of John F. Sorte, chief executive of the main brokerage unit, and further reduce the role of Frederick H. Joseph, who presided over Drexel during its rise to financial power in the 1980s and who negotiated its guilty plea to six felony counts. Sorte was named Wednesday to succeed Joseph as president of the parent company and was also appointed chairman of the brokerage unit, succeeding Edwin Kantor, who becomes a senior executive vice president of the unit.
In late May, Sorte replaced Joseph as chief executive of the brokerage unit. Joseph on Wednesday was given a new title as a vice chairman of the parent company.
Steven Anreder, a Drexel spokesman, said Sorte has been selected to run Drexel if it emerges from Chapter 11 bankruptcy proceedings as a going concern--an issue that is being negotiated with the firm’s creditors. “It’s a natural evolution that he should take over these positions,” Anreder said.
Drexel, which filed for bankruptcy protection in February after a cash crisis, was owned mainly by its employees. Anreder said the board is being reorganized to give outsiders a majority because other creditors currently have a priority claim on Drexel’s remaining assets.
In a written statement, Sorte said: “This restructuring of the board is tangible evidence of our determination to protect the creditors and preserve equity values.”
Shad, a former chairman of the Securities and Exchange Commission, had been brought in as chairman of Drexel after the guilty plea in an effort to bolster the firm’s image and ensure strict compliance with securities laws. Drexel sources have said, however, that Shad never played a very active role on the board. In a statement, Drexel said Shad had relinquished his job as chairman “because the principal purposes for which he joined the firm have been substantially achieved or obviated by the firm’s Chapter 11 filing.”
Saul, the new chairman, also is a former chairman of the management committee of First Boston Corp. and is a former president of the American Stock Exchange.
The changes in Drexel’s board will reduce the number of directors to eight from nine but will give outsiders a majority of five to three. Drexel said four directors are resigning from the board, including Roderick M. Hills, another former SEC chairman who was named to Drexel’s board at the same time as Shad. Drexel said Hills, a partner in the law firm of Donovan Leisure Newton & Irvine, resigned because he had discovered an apparent conflict of interest between serving as a director and his work for the law firm. Anreder declined to give any details of the conflict.
The other directors resigning from Drexel’s board are Robert E. Linton, a former Drexel chairman; Howard M. Brenner, a former president of the brokerage unit, and Joseph A. Vitanza, the current president of the brokerage unit.
Three new outside directors named to the board are Fletcher L. Byrom, former chairman and chief executive of Koppers Co.; Frederick W. Zuckerman, vice president and treasurer of Chrysler Corp., and Deborah H. Midanek, a managing director at Solon Asset Management Corp. Midanek, a former Drexel employee, had been chairman of the Drexel shareholders’ committee formed to represent former employees and other shareholders in the bankruptcy proceedings. But Drexel said she resigned from the committee to assume the seat on Drexel’s board.
