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Thursday, February 11, 2010

In the Land Of Cincinnati CEOs: Who's Next After Convergys Chief Is Shown The Door?

By Harry Callahan
Special to The Daily Bellwether

CINCINNATI (TDB) -- On most professional sports teams, three years of futility is usually enough for owners to throw in the towel and dump their managers. Not so in Corporate America. CEOs stay put for years and years even as their products disappoint, their service stinks, their business fortunes tank and their stock prices plunge. Just look at Joel Gemunder, CEO of Omnicare in Covington. Over nearly 30 years, Gemunder built Omnicare into the nation's biggest supplier of meds to nursing home patients, but he lost his Midas touch quite a long time ago. Omnicare's stock was worth $62.50 a share toward the end of 2005. It closed Tuesday at $25. Investors unlucky to have held it all that time lost 60 percent of their money.

How refreshing it is, then, to see another local corporation demonstrate that the buck truly stops on the desk of the CEO. Convergys Corp.'s stock traded for $26.38 when David Dougherty was promoted to CEO on April 17, 2007. Convergys is a major player in doing mundane, so-called "back office" functions like payroll and customer service for client companies, and Dougherty made out as its boss, earning $10 million in compensation between 2006 and 2008. But Convergys was stinking up the place, reporting net losses of $155 million over a 21-month span, even as rival Genpact was making money. The stock was languishing below $11 on Tuesday. The next morning, Dougherty went from CEO to mere consultant, if not an undoubtedly well-paid one. We'll know soon how big a sendoff gift he got.

One has to wonder how impatient shareholders of other big corporations have gotten with their underwhelming CEOs, like Omnicare and Cintas Corp. Cintas shares were worth $35.31 the day Scott Farmer took the CEO reins from his dad Phil Farmer. Going on seven years later, the uniform and industrial sundries maker's stock trades for less than $25, a drop of 30 percent. And that's through good times and bad.

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