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Permalink Reply by Mike on February 1, 2011 at 8:47am

any speculation as to what was going on behind the scenes to prompt this abrupt and unusual departure?

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Permalink Reply by Charles McDermott on February 1, 2011 at 9:28am

First, the article is almost standard boiler plate when a top executive leaves publicly traded a corporation.

 

Speculation?  Farrell says "As executive chairman, I remained closely involved with ResMed's strategy, so stepping back into the CEO role will not be a novelty for me and will ensure continuity for the team."  Maybe he was too closely involved and Pace couldn't do his job (make decisions).

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Permalink Reply by 99 on February 1, 2011 at 11:36am

off the resmed site

We expect the growth of all of our products to continue to benefit from the vastly under-penetrated and growing sleep-disordered breathing market. The findings from clinical studies continue to demonstrate the importance of diagnosing and treating sleep-disordered breathing (SDB). During the quarter, new 10-year study results published in the Journal of the American Heart Association showed that severe obstructive sleep apnea increased the risk of fatal and non-fatal cardiovascular events two-to five fold and can increase the risk of stroke. Recommendations were made for evaluation of SDB particularly for those with obesity, hypertension, heart disease or drug-resistant hypertension(1). Increasingly, there is evidence coming to light that early intervention in the treatment of SDB may slow or prevent the progression of these co-morbidities. The increase in awareness of the role that SDB plays in these costly and debilitating co-morbidities and in the reduction in workplace safety and productivity, should continue to be a major driver of market expansion."

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Permalink Reply by Mike on February 1, 2011 at 12:22pm

here's the compensation he was receiving at ResMed (from the latest ResMed proxy statement filed with the SEC):

below is what he's getting for coming on board at his new gig (full copy of his new employment agreement at http://sec.gov/Archives/edgar/data/1457543/000119312511019709/dex99...) -- anyone got a calculator? ;)

On January 29, 2011, the Company entered into an employment agreement (the “Agreement”) with Mr. Gallahue with respect to his employment as Chief Executive Officer and Chairman of the Board of Directors. The Agreement provides for an initial term of three years and will automatically renew thereafter for consecutive one year terms unless earlier terminated by either party upon 180 days advance notice. The Agreement provides for an initial annual base salary of $1,150,000 and a target annual bonus incentive under the Company’s Management Incentive Plan (“MIP”) of 120% of his annual base salary. The Company will also pay Mr. Gallahue a cash sign-on bonus of $650,000, which he is required to repay if he voluntarily terminates his employment without Good Reason or if he is terminated for Cause within one year of the Effective Date. Mr. Gallahue will be granted a sign-on equity award (the “Sign-On Equity Award”) comprised of performance stock units based on a value of $7.2 million. These performance stock units will vest on the third anniversary of the grant date, subject to the Company’s achievement of certain stock price targets. In addition, to compensate Mr. Gallahue for the forfeiture of the value of equity grants from his previous employer, the Agreement provides for buy-out equity awards (the “Buy-Out Equity Awards”) comprised of stock options with a value of $5.66 million and restricted stock units with a value of $10.58 million. These stock options and restricted stock units will vest in annual installments of 33 1/3% on each of the first three anniversaries of the grant date, provided that Mr. Gallahue is employed with the Company on the applicable vesting date. Mr. Gallahue will also be eligible for an annual long-term incentive grant in fiscal 2012 at the time grants are generally made to other senior executives.

In the event the Company terminates his employment without Cause (as defined in the Agreement) or Mr. Gallahue terminates his employment for Good Reason (as defined in the Agreement) (a termination without Cause or for Good Reason a “Qualifying Termination”), Mr. Gallahue will be entitled to (i) accrued and unpaid base salary through the termination date; (ii) a prorated MIP bonus payment for the year in which the termination occurs, (iii) a severance payment equal to the sum of (A) two times his annual base salary plus (B) two times his two-year average actual MIP bonus payment; and (iv) continued group health plan coverage through COBRA for 18 months. In the event of a Qualifying Termination, the Buy-Out Equity Awards shall vest, to the extent not then vested, as to the next annual installment; provided that, in the event a Qualifying Termination occurs within two years following a Change of Control, the Buy-Out Equity Awards shall vest in full. With respect to the Sign-On Equity Award, in the event of a Qualifying Termination prior to the third anniversary of the grant date, all performance stock units subject to the Sign-On Equity Award that would have vested prior to such date based on the achievement of the associated Company stock price targets will vest; provided that, in the event a Qualifying Termination occurs within two years following a Change of Control, and is after the first anniversary but before the third anniversary of the grant date, all performance stock units subject to the Sign-On Equity Award with an associated stock price target at or below the per share consideration in the Change of Control transaction shall vest in full.

The Agreement also provides that Mr. Gallahue will be eligible to participate in the Company’s employee benefits programs, which include retirement, savings, nonqualified deferred compensation, welfare, fringe benefits and perquisite programs, and will be given paid vacation, in accordance with plans and policies in effect for other senior executives. The Company also agreed to reimburse Mr. Gallahue for legal fees and expenses up to $45,000 in connection with his diligence of the Company and the negotiation and execution of the Agreement.

j n k said:

A better offer, maybe?

 

http://www.prnewswire.com/news-releases/carefusion-names-kieran-t-g...

 

My question is about this sentence in the leaving-ResMed story:

 

"ResMed does not anticipate any material change in strategy or operations as a result of this management change."

 

It that line supposed to be comforting, or disturbing?

 

:-)

 

-jeff

Mike said:

any speculation as to what was going on behind the scenes to prompt this abrupt and unusual departure?

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Permalink Reply by Mike on February 1, 2011 at 12:26pm

ha ha  . . . disturbing in my view.  since RMD strategy and operations seems to screw the patient at every turn, i am personally looking forward to some "material change."

j n k said:

My question is about this sentence in the leaving-ResMed story:

 

"ResMed does not anticipate any material change in strategy or operations as a result of this management change."

 

It that line supposed to be comforting, or disturbing?

 

:-)

 

-jeff

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Permalink Reply by Mike on February 1, 2011 at 12:30pm

this is atypical disclosure in a press release of this nature -- clear signal to the market that he wasn't fired or pushed out, but that he cut out for his own reasons and without much warning -- the lack of severance payments being triggered by this departure underscores that point : 

 Dr. Farrell commented, "Kieran's resignation came as a surprise"

Charles McDermott said:

First, the article is almost standard boiler plate when a top executive leaves publicly traded a corporation.

 

Speculation?  Farrell says "As executive chairman, I remained closely involved with ResMed's strategy, so stepping back into the CEO role will not be a novelty for me and will ensure continuity for the team."  Maybe he was too closely involved and Pace couldn't do his job (make decisions).

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Permalink Reply by gordon on February 1, 2011 at 2:19pm

bought another 100 shares. RMD is worth at least $50/share. $30 is post-split price, it's not going below, imo.

While you're at it, Altria (MO)near$ 23.50 is paying 6.5% dividend today, and it's a 2-fer, invest in smokers, they make good CPAP candidates. :~)
j n k said:

"Better" for some guys means 'more opportunity to show my stuff.'

 

Company-building is what makes reputations in those kinds of gigs.

 

Gallahue may see himself as sort of the Rick Pitino of the medical company world, specializing in team-building and profit-maximizing. Move in when there is potential for growth; move on when your work is done.

 

That said, when your eye is that solidly fixed on profits, customers can suffer. Internet price-fixing is nothing more than getting in bed with the same DME cartel that has failed patients miserably in this country. I'm not saying that ResMed is evil, but they've made what I consider to be underhanded pacts with less than angelic businessmen when deciding how to handle Internet pricing.

 

OSA patients will be buying machines for a lifetime. And we don't forget when a company has shown itself more interested in gouging patients than pressurizing their airways.

 

In my opinion.

 

-jeff

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Permalink Reply by gordon on February 1, 2011 at 3:57pm

That's an offer at twice the salary, at quick glance. Not bad, nothing against RMD.

j n k said:

This story may 'bout sum up the ship-jump, though I am sure it isn't the entire story:

 

http://www.signonsandiego.com/news/2011/feb/01/resmed-chief-jumps-c...

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Permalink Reply by Mike on February 1, 2011 at 4:01pm

salary is just one component of overall compensation.  i haven't taken a look at the equity component, but i'd be interested in how equity comp compares 

gordon said:

That's an offer at twice the salary, at quick glance. Not bad, nothing against RMD.

j n k said:

This story may 'bout sum up the ship-jump, though I am sure it isn't the entire story:

 

http://www.signonsandiego.com/news/2011/feb/01/resmed-chief-jumps-c...

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Permalink Reply by gordon on February 1, 2011 at 4:07pm

http://www.nasdaq.com/asp/holdings.asp?symbol=RMD&selected=RMD

he owns about 57,000 shares still.

http://tinyurl.com/4mf4aju

Mike said:

salary is just one component of overall compensation.  i haven't taken a look at the equity component, but i'd be interested in how equity comp compares 

gordon said:

That's an offer at twice the salary, at quick glance. Not bad, nothing against RMD.

j n k said:

This story may 'bout sum up the ship-jump, though I am sure it isn't the entire story:

 

http://www.signonsandiego.com/news/2011/feb/01/resmed-chief-jumps-c...

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Permalink Reply by Judy on February 1, 2011 at 7:39pm

You beat me to the punch, Mike. I've been reading all the news stories I could find about this before I was going to post the news.

 

As far as I'm concerned it is good riddance to Mr. Gallahue. Look at his dates of "employment" w/Resmed and Resmed's history prior to his affiliation w/them.

 

Resmed (under Peter Farrell) was the leader in easy access to and amount of data available TO THE PATIENT via the LCD screen. The S8s were a sturdy, reliable, dependable PAP and quite likely their crowning glory.

 

WHEN did Resmed's "abusive" policies regarding online sales, pricing, the quality control problems w/the FX masks' cushions begin? Just take a look at the dates of Gallahue's tenure at Resmed.

 

Gallahue joined ResMed in 2003 as president and chief operating officer. He became CEO in January 2008 when the company's founder and chairman, Dr. Peter Farrell, stepped out of the chief executive role.

 

Resmed has been Peter Farrell's "baby" since its inception giving him a tremendous interest in the products, the quality control, the reputation of its products.

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Permalink Reply by Judy on February 1, 2011 at 8:10pm

Peter Farrell was CEO when the S8s were developed. Gallahue has been CEO w/the introductions of the early collapsing Swift FX nasal pillows, the weak ClimateLine hoses .....

... they forced cpapauction.com to discontinue allowing resmed products on their site.

... they threatened to withhold product from cpap.com since cpap.com sponsors cpapauction.com

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