Harry M. Jansen Kraemer Jr. unexpectedly disclosed plans to step down from the top job at Baxter International Inc. Monday, spurring speculation that Baxter’s board has wearied of the turbulence that has buffeted the medical products maker of late.
“Given the challenges the company has faced during the last year,” 49-year-old Kraemer said in a prepared statement released Monday evening, “I felt it was best for Baxter that I step down at this time.”
Kraemer will remain chairman and chief executive, Baxter said, until the company settles on a successor. The company indicated the search for a new CEO will include non-Baxter candidates, a departure from the company’s historical inclination to promote from within.
Indeed, there is no obvious heir apparent inside the Deerfield-based company; since Kraemer moved from the No. 2 spot into the CEO chair in January 1999, Baxter has not had a president or chief operating officer.
As chief financial officer, and later as president, under former CEO Vernon Loucks, Kraemer enjoyed a reputation as a can-do manager of financial operations. He also played a key role in helping Loucks execute a widely praised strategy of shedding many of Baxter’s underperforming businesses.
Kraemer continued that streamlining after he succeeded Loucks, drawing high marks from Wall Street in the process. Later in his five-year tenure as CEO, however, Baxter encountered increasingly heavy competition that caused it to repeatedly fall short of investor expectations–and Kraemer’s once-sterling reputation lost a good deal of its luster on Wall Street.
As a result, Kraemer’s exit, while unexpected, was not a total surprise.
“Nowadays CEOs work on much shorter leashes,” observed Kenneth Abramowitz, an analyst with The Carlyle Group in New York. In view of Baxter’s recent troubles, he said, Baxter’s board probably “wanted to try a new jockey on the horse.”
Kraemer, who has historically been unusually accessible to the media, was unavailable for comment Monday evening.
Baxter announced Kraemer’s pending departure less than 72 hours before the Deerfield company is scheduled to release its fourth-quarter earnings. Kraemer is scheduled to address analysts during the Thursday morning conference call.
Seeking to reassure investors, the company said Monday that those results will be in line with guidance officials provided a month ago.
That was hardly cheering news. Just before Christmas Baxter dismayed investors by lowering its profit guidance for the fourth time in less than 15 months.
Baxter’s forecasting difficulties stem in large part from the fact that prices in a key blood-therapies sector have dropped dramatically because of industry consolidation and new entrants into the market.
That is in contrast to previous years, when Baxter was the beneficiary of regulatory troubles that not only burdened some rivals but kept industry prices high.
Despite staff cuts and a number of other cost-reducing measures designed to offset the recent pressures, a spokeswoman conceded a month ago that Baxter’s profit margins “have not improved as much as we had anticipated.”
The most grievous damage to Baxter’s credibility came in mid-March 2003, on a day the company had scheduled a meeting to discuss its growth plans with analysts.
The meeting was blighted by the company’s early-morning disclosure that 2003 earnings would fall short of the already-reduced guidance it had issued. Baxter shares tumbled almost 21 percent on the day of the meeting.
Investors also learned that day that the Justice Department had subpoenaed the company’s records related to the 2001 deaths of more than 50 kidney dialysis patients in the U.S. and six other countries.
Investors had thought the dialysis-filter debacle was behind Baxter. Kraemer won kudos and relatively quick settlements with patients after admitting that the filters and a fluid used to test the filters for leaks were likely the cause of the deaths.
The FDA probe has yet to be resolved.
Baxter’s repeated forecasting missteps did not merely anger investors but drew the attention of securities regulators as well.
In July, the company cut its 2003 forecast once again, at the same time it announced a restructuring plan that would eliminate more than 3,200 jobs. That same month the company disclosed that the Securities and Exchange Commission was reviewing Baxter’s forecasting. The government review remains open, the company said.
Those chaotic events led some observers to wonder what had happened to Kraemer’s once-golden touch. In fact, they caused some to wonder how safe his job was.
“Perhaps he sensed that he lost the confidence of the board and he resigned,” said Ben Andrew, an analyst with William Blair & Co. in Chicago.
“This is the man’s dream job, so I don’t think you just walk,” Andrew added. “I don’t think Kraemer would willingly give up here. He is a can-do kind of guy.”
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Harry Kraemer
Harry Kraemer has been CEO of Baxter International Inc. since January 1999. He was named chairman of Baxter’s board of directors in 2000.
Age: 49
Education: Bachelor’s degree in mathematics and economics from Lawrence University in Wisconsin; also has a master’s degree from Northwestern.
Work history: Before joining Baxter in 1982, Kraemer worked for Bank of America in corporate banking and Northwest Industries Inc.
At Baxter he has held several positions, including senior vice president and chief financial officer.
Area CEO departures reach 4
Since August, chief executives of four top Chicago-area companies have resigned or been removed. Here’s a look at them.
Harry Kraemer
Baxter International Inc.
Chicago rank: No. 12
Date of announcement: Monday
Background: Kraemer cited many challenges during the past year. The company has repeatedly missed earnings estimates and faced growing criticism on Wall Street.
Quote: “Given the challenges the company has faced during the last year, I felt it was best for Baxter that I step down at this time.”
Replacement: To be announced. He will remain until a successor is named.
Betsy Holden, co-CEO
Kraft Foods Inc.
Chicago rank: No. 3
Date of announcement: Dec. 16, 2003
Background: Holden was removed as the giant’s sales slipped amid uncharacteristic missteps with the launch of new Kraft products.
Replacement: Roger Deromedi, promoted from co-CEO position to sole CEO
Philip Condit
Boeing Co.
Chicago rank: No. 6
Date of announcement: Dec. 1, 2003
Background: Condit resigned after a series of military contract scandals left politicians and others doubting the company’s integrity and investors questioning the quality of the aerospace manufacturer’s leadership.
Quote:”I care very deeply about this company and the success of the company. I wanted to do what was best for the company.”
Replacement: Harry Stonecipher, former chief executive of McDonnell Douglas
Christopher Galvin
Motorola Inc.
Chicago rank: No. 4
Date of announcement: Sept. 19, 2003
Background: Galvin retired from the company his grandfather founded. During his six-year tenure at the top, losses grew, layoffs mounted and its dominance in key markets evaporated.
Quote: “While I have achieved substantial results, the board and I do not share the same view of the company’s pace, strategy and progress at this stage of the turnaround.”
Replacement: Edward Zander, former Sun Microsystems Inc. president and chief operating officer.
