Wednesday, February 27, 2013

Hmmm. . . Is Mr. Bertolini's CFO Role Only Temporary?

I am trying to remember if I've ever seen (post-Sarbanes-Oxley) any public life science or health care company with a market cap of more than $2 billion where the Chief Financial Officer role (essentially the person most directly responsible for the integrity of management's financial statements, among other matters, under S-Ox) has been combined with the President's role (essentially the person most directly accountable for delivering the operational results of the company, rolled up).

Not that Mr. Hassan, et al., have ever been model citizens for good corporate governance structures, mind you -- but. . . I literally cannot recall this ever being done. Except as a temporary assignment, when the President is becoming CEO, and the CFO is the likely incumbent for the President role. [Note that life science companies inherently run on, and create, massive "binary" disclosure events: success or failure of pivotal clinical trials; FDA ordered withdrawals; sudden market obsoleting new drugs, etc., etc. -- and so, the area is ripe for "informational asymmety" securities trading -- or less politely, insider trading.]

In the case of Bausch + Lomb, Brent Saunders is clearly the lead executive officer -- and unless Fred Hassan is planning on exiting as the Chairman of the Board (not likely) -- it is very odd that Mr. Bertolini holds both a "financial control/reporting" and "direct operations" responsibility. [Indeed, some might argue that similar structural oddities just cost legacy Schering-Plough over two-thirds of a billion dollars in federal securities class action settlements.]

Twice - actually. As both Cain v. Hassan and Manson (the ENHANCE matter) involved structural role problems at legacy Schering-Plough, to one degree or another. Yes, many corporate governance experts might say the B + L announcement of yesterday contains a flashing yellow warning light: it creates an inherent tension -- between the executive's office(s): does Mr. Bertolini finance the company, or does he operate it? Is he responsible for financial reporting compliance -- or does he answer to Wall Street, for the operational results?

These are important -- and wholly-unanswered -- questions, out of yesterday's "we're putting the legacy Schering-Plough team back on the field" announcement -- at Bausch + Lomb.

But, as I say, in my experienced opinion, Mr. Hassan has never been one to worry much about the seemingly trifling matters of good governance at public life science companies. Now we will keep a close eye on that situation -- and report accordingly.

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