Companies in the banking and financial sector made more top management changes--namely, by changing chief executive officers--than those in any other sector during the month of June. Banks posted 21 CEO changes, according to research and consulting outfit Liberum Research. Of course, the most notable change was Phil Purcell's resignation from Morgan Stanley and subsequent replacement by John Mack.
Richard Jacovitz, senior v.p. and director of research at Liberum, explained management turnover often signals a major change underfoot at a company such as corporate malfeasance or a pending merger or acquisition. And this can obviously affect bond prices, though he declined comment specifically on management change's impact on credit quality. Yet in the case of Morgan Stanley, personnel turmoil clearly impacted credit quality, according to Standard & Poor's, as the resignations of vice chairman Joseph Perella and former president Stephen Newhouse prompted it to revise Morgan Stanley's credit outlook from positive to stable on March 30 and from stable to negative on April 15 (BW, 4/25).
As for Liberum's research, the drug and biotech industry had the most management changes overall in June, with 116 changes. The manufacturing sector had the second most management turmoil with 84 changes, while banking had 83 overall. Jacovitz noted Liberum was created to focus on management change in response to demand from hedge fund and mutual fund investors. Liberum launched its database of management changes in January and offers consulting services to assess the impact of the change on a company.
