Boston Scientific to Eliminate Jobs in Boston
Posted on May 11, 2010
Boston Scientific prohibited the media from covering its annual shareholders meeting, which led many to speculate that it was discussing pending layoffs and its need to eliminate more jobs in Boston.
The Natick, Mass.-based medical device maker did not specifically say why it decided to close the meeting, which was held in Boston. It was the company’s first annual meeting since hiring J. Raymond Elliott as president and CEO last July.
Boston Scientific (NYSE: BSX), which has significant operations in Maple Grove and Arden Hills, reported last month that it lost $1.59 billion in the first quarter of 2010 after writing off $1.8 billion in costs related to a recall of implantable cardiac defibrillators.
It also eliminated thousands of sales jobs in Boston.
In February, the company agreed to pay $1.73 billion to New Brunswick, N.J.-based competitor Johnson & Johnson to settle three patent disputes, and it announced it would eliminate up to 1,300 jobs as part of a corporate restructuring.
According to the Boston Globe, corporate governance consultants said a ban on news coverage creates the appearance that a company is hiding something.
Its not the best practice to close a meeting, said Beth M. Young, senior research associate at the Corporate Library, a Portland, Maine, research firm that tracks shareholder issues. It sets a tone and creates a feeling of distrust and secretiveness, which is not what a company wants to do when its facing challenges.
Frank Glassner, chief executive of Veritas Executive Compensation Consultants, a pay consulting firm based in San Francisco, said, Very generous executive pay in light of very poor company performance may have something to do with it. Probably, the best thing Boston Scientific could do at this point is to establish transparency.
Shares of Boston Scientific closed at $6.60 on the New York Stock Exchange yesterday, up 3.5 percent for the day, but still close to their 10-year low. Shares traded at more than $44 a share in 2004, but they have been declining steadily since the company completed its controversial $28.4 billion acquisition of Guidant Corp. in 2006.
Elliott, who has worked to fix problems stemming from that merger, has run into a number of setbacks. Last month, a Minnesota judge rejected a plea deal between Boston Scientific and the Justice Department, calling on the government to put the company on probation for Guidants concealment of safety defects in its heart defibrillators earlier in the decade. That followed a monthlong suspension of defibrillator sales ordered by the Food and Drug Administration after Boston Scientific failed to notify the FDA about production changes.
Young, who is also a corporate governance consultant to institutional investors, said a decision to exclude reporters from shareholders meetings typically comes when company executives are worried about fielding critical questions from investors.
A lot of it comes from the comfort level of the management team, how secure they feel in their ability to handle unexpected things that might happen, she said. They like to keep things scripted, but theres always the possibility someone could get up and ask some uncomfortable questions and executives could lose their composure.
Young said that executive compensation is often a touchy subject at annual meetings. If theres a disconnect between how the company is performing and what the CEOs getting, thats a subject that can get the CEO very prickly, she said.