As PolyOne Corp. begins its search for a new chief executive officer, industry watchers are split as to how the company should proceed and what it needs to do to recapture the potential of its launch in 2000.
Thomas Waltermire resigned Oct. 7, after five years at the top of the Avon Lake, Ohio-based firm - North America's largest compounder. The departure of the 55-year-old Waltermire surprised many in the industry.
``I didn't see it coming, but these are tough times,'' said Saul Ludwig, a stock analyst who covers PolyOne for Cleveland-based McDonald Investments Inc. ``None of these [specialty chemical] companies are doing well.''
PolyOne ``was doing better recently, but they may have been just making the best of a bad situation,'' Ludwig added. ``They're struggling to pass on raw material costs, just like [compounders] Spartech, Ferro or Schulman.''
An executive at a competing firm said he was not surprised by Waltermire's resignation, but by its timing.
``If it was going to happen, I thought it would have happened a few years ago,'' the executive said. PolyOne posted a pro forma profit of $52 million in 2000, the year it was formed from the merger of Geon Co. and M.A. Hanna Co., but lost a total of $355 million from 2001-03.
Waltermire's resignation came a day after PolyOne's board held its regularly scheduled meeting, which Waltermire attended. Dennis Cocco, director of investor relations, said he had no details of any interaction between Waltermire and the board during that meeting.
Calls placed to PolyOne board members Wayne Embry and Carol Cartwright were not returned. Waltermire also could not be reached.
Former Geon chief William Patient is serving as interim CEO. Patient retired from Geon in 1999, but returned to PolyOne in late 2003 as chairman. At the time, Patient's return was seen as an expression of the board's lack of confidence in Waltermire.
Since 2000, PolyOne has lost about 30 percent of its annual sales while closing more than 20 plants and cutting more than 1,300 jobs.
Several business units also have been labeled as noncore and have been sold. Today, the firm employs about 6,500 at 63 locations worldwide.
PolyOne now is working with a global executive search firm to find a replacement, but Cocco said the firm has not ruled out finding a replacement from within the company.
Industry watchers said such a move is unlikely, especially since the 71-year-old Patient, and not a younger executive, was named interim CEO.
If the firm goes outside the company, some suggested that finding a CEO candidate from a larger plastics or chemicals company - such as Dow Chemical Co. or GE Plastics - might be a possibility.
A candidate with a strong marketing background would be a good choice, one industry executive said, particularly since it would be a switch from the financial background Waltermire brought to the job.
For his part, Waltermire, who joined Geon in 1974, will receive his full salary for three years and at least partial compensation in PolyOne's long-term incentive plans through 2007. In addition, Waltermire will receive his 2005 annual bonus and health-care benefits for three years.
In 2004, Waltermire's salary was almost $680,000 and he received a bonus of almost $934,000. His 2005 bonus will depend on the firm's earnings and cash flow for the year, said Cocco. Waltermire's total compensation in 2004 was more than double what he received in 2003, according to PolyOne financial filings.
Beth Young, a compensation analyst with Corporate Library LLC, a consulting firm in Portland, Maine, said Waltermire's separation package is ``pretty standard'' for a company of PolyOne's size.
``The basic terms are three times base salary plus bonus,'' Young said. ``A lot of times, these terms are set out at the time of the hire. [The terms] can get richer when [a CEO] leaves, whether it's because the company's doing well or the CEO needs to be persuaded to leave.''
According to Cocco, Waltermire had no pre-existing separation deal; one was prepared at the time of his resignation based on comparable situations in the industry, Cocco said.
Young added that most CEO departures in the current market are described as ``noncause terminations.''
``But in these agreements, the definition of `cause' doesn't include poor company performance,'' she said.
James Aslaksen at Los Angeles-based executive recruiter Korn/ Ferry International agreed that Waltermire's separation package is in line with industry standards. Aslaksen, Korn's performance materials sector leader, commended Waltermire for performing relatively well under difficult conditions.
Waltermire ``did a good job until natural gas costs and stress on PVC increased,'' Aslaksen said. ``[Waltermire] held his head high.
``You don't treat a guy poorly when he's been a good soldier for you for so many years,'' Aslaksen added. ``How was [he] supposed to prevent Katrina?''
Moving forward, PolyOne may need to refocus on a few key markets. The 2000 merger was to combine Geon's extensive background in PVC and compounding technology with Hanna's recently assembled collection of compounders, color concentrate makers and resin distributors. But numerous personnel changes - along with the discovery that business conditions at several Hanna sites had been less favorable than anticipated - led to an environment of uncertainty that worsened when the economy went south.
``They still might be able to make it work,'' one rival executive said. ``But this is a crucial decision they're facing in replacing Waltermire.''