Surprise director departures boost WellPoint shares

WellPoint Inc. shares rose more than 2 percent Tuesday morning, a sign that investors were not unnerved by the disclosure that three of the company’s 11 directors had resigned, citing personal reasons.

Lenox Baker, Sheila Burke and Susan Bayh stepped down from the board effective immediately, Indianapolis-based WellPoint said late Monday afternoon in a regulatory filing.

“Each of the directors resigned for personal reasons and there were no disagreements or disputes between the company and any of the named directors which led to their resignation,” WellPoint said in the filing.

Two outside observers cast the departures as a positive that allows new CEO Joseph Swedish, a veteran hospital executive, to put his stamp on the company. Institutional investors had criticized the board for a variety of matters, including its 2007 hiring of Angela Braly as CEO. After a series of missteps under Braly’s leadership, the board ousted her in August.

“This is normal and it’s probably good for the company to clean out a few of the board members, especially given how long it took the board to come to the decision that it was time to remove the prior CEO,” Erik Gordon, a business professor at the University of Michigan in Ann Arbor, told Bloomberg. “A new CEO always wants the full support of the board.”

In a note to clients, Brian Wright, an analyst with Monness Crespi Hardt & Co., added that the resignations are “fortuitous for CEO Swedish as it allows him the opportunity to upgrade the talent of his board. We believe investors will view this favorably, as well.”

WellPoint shares were trading at midday at $77.94 a share, up $1.93, or 2.5 percent on the day.

The company announced the departures just six weeks after Swedish’s hiring and two days before its annual meeting.

Baker, 71, had been a director since 2002. Burke, 62, had served since 2004, and Bayh, wife of former U.S. Sen. Evan Bayh, had served since 2001. Burke had been scheduled to be up for election at Wednesday’s annual meeting. WellPoint filed new proxy materials late Monday reflecting she had withdrawn.

Baker is a retired cardiac surgeon, Burke is a lecturer at the Kennedy School of Government at Harvard University, and Bayh, 53, is a lawyer.

WellPoint “has benefited from their knowledge, leadership and many contributions,” the company said in a prepared statement. “Health care is transforming and that transformation is accelerating rapidly.”

Asked when new board members might be chosen, Kristin Binns, a WellPoint spokeswoman, didn’t give a timeline. “The board constantly evaluates qualified individuals,” she told Bloomberg in an e-mail. “They remain committed to this on-going process.”