ROCHESTER, N.Y. — Eastman Kodak Co. Chairman and Chief Executive Kay Whitmore was fired Friday by the company's outside directors, the latest sign of how corporate boards are exerting more control over under-performing companies.
Whitmore, who drew fire from Kodak directors for moving too slowly to cut costs and boost earnings, agreed to retain his post until a successor is named.
The surprise move immediately caused investors to buy up stock of the leading photographic and chemical company, and Kodak jumped $3.25 per share on Friday to close at $58.625 on the New York Stock Exchange--a boost of more than $1 billion in the firm's market value.
The 61-year-old Whitmore joins chief executives from a host of large industrial companies, including General Motors, International Business Machines, Digital Equipment and Westinghouse, who have been kicked out in favor of company outsiders.
"This is a new day for American shareholders," said Robert Monks, principal of the Lens Fund, which holds $4 million in Kodak stock, and a leader of the stockholder activism movement.
Kodak's problems go back to the 1980s, when it lost a virtual monopoly in consumer photographic film to competition from Fuji Photo Film and low-price private brands. In addition, the company is saddled with debt left over from the $5.1-billion acquisition of Sterling Drug in 1988.
Kodak has struggled through a series of restructuring efforts to boost its lackluster earnings. Kodak shares have languished, falling most recently when corporate turnaround artist Christopher Steffen quit the company in frustration over its resistance to sterner cost-cutting measures.
Kodak said the dismissal of Whitmore "is not based primarily on the quality of the strategic and operating plan as developed to date, but also on the need for solidly improving the energy and efficiency with which the company will be run in the future."
"We believe there is a clear need to move faster and further on operating cost efficiencies and enhanced earnings," Kodak's independent board said in a statement.
Kodak said in June that it would spin off its chemicals business, and Whitmore had promised to announce an overall restructuring plan by late September.
Industry analysts had speculated that the company might sell off its Sterling pharmaceutical unit, which makes Bayer and Panadol pain relievers, but board member John Phelan said it will not be sold.
Whitmore had promised to appoint a new chief financial officer soon to replace Steffen, whose resignation in April after just 79 days on the job brought a $1-billion sell-off of Kodak shares.
"I think investors will view this, on balance, as positive," said Thom Brown, managing director at Rutherford, Brown & Catherwood.
"One of the things that kept Kodak's (stock) price down for so long was the fact management just wasn't responding to problems it obviously had," he said. "A lot of people felt that basically was Whitmore's fault."