McKesson Fires Chairman and 4 Others; 2 Quit
A growing controversy over suspected accounting abuses at McKesson HBOC Inc., the world’s largest drug wholesaler, led Monday to the firing of the company’s chairman and the abrupt departure of six other executives.
San Francisco-based McKesson lost its top three executives in the purge, along with four high-ranking officials at its information technology unit.
The shake-up stems from the company’s continuing investigation into the information technology business, which was known as HBO & Co. until it was acquired by McKesson in January. McKesson previously said its auditors this spring discovered that the unit systematically padded its revenue on software sales.
Management experts noted that the ousters by McKesson’s board come at a time when corporate directors are increasingly cracking down on executives associated with poor corporate performance or wrongdoing.
Wall Street analysts added, however, that the alleged improprieties at McKesson left the board with little choice but to move decisively.
“The board decided in no uncertain terms that they will not tolerate any inappropriate behavior,” said an approving Kenneth S. Abramowitz, a health-care analyst who follows McKesson for the Wall Street firm Sanford C. Bernstein & Co.
Analysts said McKesson, a Fortune 100 company, remains strong financially, and they predicted that it will shake off the impact of the controversy.
About half the company’s revenue comes from its traditional pharmaceutical distribution business, “and that portion is doing fine,” Abramowitz said.
As for the newly acquired technology business, he added that “usually when companies get involved in a situation like this, it takes one or two years to turn the ship around.”
Investors, meanwhile, appear to be wary of the company’s stock until the extent of the problem is determined by auditors.
McKesson shares dropped $2.38 to close at $33.69 on the New York Stock Exchange in heavy trading, nearing the low of $32 reached after the initial accounting problems were disclosed in April.
The list of departing executives was led by Charles W. McCall, 55, chairman of the board of McKesson and chief executive of HBO & Co. when it was acquired in January. A company spokesman said McCall was fired because “the improprieties occurred on his watch. Beyond that, we don’t have any comment.” McCall could not be reached.
Company officials took a different tone in connection with the resignations of Mark A. Pulido, 46, president and chief executive, and Richard H. Hawkins, 49, executive vice president and chief financial officer.
The two were described as respected executives from the McKesson side of the company. Although Pulido and Hawkins accepted responsibility for the accounting problems, company officials said there is no evidence they were involved in any wrongdoing.
Replacing McCall as chairman is Alan Seelenfreund, 62, who was McKesson’s chief executive from 1989 through 1997 and who has continued with the company as a board member.
The company also immediately replaced Pulido by promoting two executive vice presidents--David L. Mahoney, 44, and John H. Hammergren, 40--to the newly created positions of co-chief executives.
McKesson saved its harshest comments for the four former HBO & Co. executives who were fired from McKesson’s Information Technology Business unit.
Seelenfreund said in a news release that “because of the nature of accounting improprieties that we have found at the old HBO & Co., which is now our ITB unit, and the participation of senior-level employees of this business in such improprieties, we felt compelled to take prompt and decisive action. The failure of responsible leadership in the ITB business has harmed our entire employee population and shareholders, and cannot be tolerated.”
In a telephone interview, Mahoney said officials with the Securities and Exchange Commission are reviewing the situation but that he knows of no other investigations by government agencies.
Since disclosing the accounting problem, McKesson has been hit with more than 30 shareholder lawsuits.
McKesson employs 24,500 workers, almost all of them in the United States or Canada. The financial results for its most recent fiscal year--which include transactions currently being scrutinized by auditors--included net income of $237 million, or 84 cents per share, on revenue of $30.6 billion.
