RadioShack CEO resigns amid resume questions
(Dallas Morning News, The (KRT) Via Thomson Dialog NewsEdge) Feb. 21--RadioShack Corp. president and chief executive David Edmondson resigned Monday, following a tumultuous week in which he admitted to "misstatements" on his resume, announced dramatically lower earnings and said the embattled chain may be forced to close up to 700 stores.
Claire Babrowski, a former McDonald's Corp. executive who joined RadioShack last year, was promoted to president and acting chief executive, RadioShack said. She will oversee the troubled company's turnaround plan, which Mr. Edmondson unveiled last week.
RadioShack retained an executive search firm to launch a hunt for a new CEO and will consider internal and external candidates, including Ms. Babrowski.
Mr. Edmondson's resignation resulted from a mutual decision reached with the board, said RadioShack chairman Leonard Roberts. Mr. Edmondson will receive a total severance package of around $1.5 million, with specific amounts to be detailed in regulatory filings today, Mr. Roberts said.
Mr. Edmondson's departure spotlights how ethical considerations have become increasingly important in today's business environment, in the wake of a series of high-profile corporate scandals.
The 46-year-old marketing whiz's rapid fall from the pinnacle of RadioShack's executive suite was marked by shifting messages from the company's board of directors.
On Feb. 14, following a news report questioning an entry on Mr. Edmondson's resume, the board offered its support to the CEO.
But the next day, Mr. Edmondson admitted he couldn't document his diploma and apologized. The board then said it would ask an independent counsel to investigate whether he had fabricated his academic credentials.
Now, his departure amounts to a recognition that the controversy had become a distraction for the troubled Fort Worth-based electronics retailer.
"It's been a very, very painful process for us," Mr. Roberts said in a conference call with reporters Monday afternoon. "One of the most important things we have as a corporation is integrity and trust. We know we have to restore that back to our company."
Mr. Edmondson said in a statement: "At this time, the board and I have agreed that it is in the best interest of the company for new leadership to step forward so that our turnaround plan has the best possible chance to succeed, as I know it will. ... RadioShack is a good company, that has both the will and the plan to be a truly great company."
RadioShack, the venerable seller of mobile phones, batteries and other gadgetry, said Friday that poor financial results would force it to close up to 10 percent of its 7,000 stores.
Net income fell by 62 percent during the last three months of 2005 compared with the same period the year before, capping a year in which profits declined sharply even as total sales rose by 5 percent.
Wall Street's first opportunity to respond to the news of Mr. Edmondson's departure will come this morning because markets were closed Monday for the Presidents Day holiday.
On Friday, RadioShack's share price fell 8 percent after the disclosure of its financial results. The share price has fallen by more than 25 percent since last May, when Mr. Edmondson became chief executive, and has lost more than half its value over the last five years.
The resume uproar was ignited by a story in the Fort Worth Star-Telegram questioning whether Mr. Edmondson told the truth when he said he obtained two degrees from an unaccredited school called Pacific Coast Baptist Bible College.
The school, now located in Oklahoma and called Heartland Baptist Bible College, said it could not find proof that Mr. Edmondson had finished his studies.
With Mr. Edmondson's resignation, RadioShack said the independent counsel's investigation will not continue. The board said it knew "some, but definitely not all" of the issues raised in the last week. In addition to the questions about his resume, Mr. Edmondson also awaits trial on a charge of driving while intoxicated.
The acting CEO, Ms. Babrowski, 48, rose to become the highest-ranking female executive at McDonald's. Her accomplishments include spearheading the launch of menu additions such as salads and the McRib sandwich. Ms. Babrowski started out as a crew member at a McDonald's restaurant as a teenager.
Ms. Babrowski has no undergraduate degree but obtained a master's degree in business administration from an executive MBA program at the University of North Carolina.
Students who enter that program are expected to have a bachelor's degree or equivalent. However, the school leaves open the possibility that each year, some people may enter the program with no undergraduate degree, said Penny Oslund, executive director of the Executive MBA program at the UNC Kenan-Flagler Business School.
In those cases, Ms. Oslund said, the school weighs standardized tests more heavily, as well as examining work experience and leadership.
Mr. Roberts, the RadioShack chairman, praised Ms. Babrowski's ability as a business executive. He also said the company had scrutinized her resume when it hired her.
"She was fully vetted," he said. "I guarantee you, all our resumes are being vetted now. That's probably good advice for all Corporate America now."
Starting in 2001, financial accounting scandals at companies such as Enron, WorldCom and Adelphia Communications eroded investor confidencein U.S. corporations.
In response, the Sarbanes-Oxley Act of 2002 and regulatory changes by the U.S. Securities and Exchange Commission have placed tougher requirements on companies to improve corporate governance.
"The whole issue is gaining the confidence of the investing public," said Constantine Konstans, the executive director of the Institute for Excellence in Corporate Governance at the University of Texas at Dallas.
"Without our great capital market system operating efficiently, this economy cannot prosper," he said. "For the capital markets to operate effectively, you need investor confidence."