The board of directors of HCP Inc. (NYSE:HCP) announced Thursday it has fired chairman, president, and CEO James Flaherty III and elected Lauralee Martin to the position of president and CEO. The board also elected Michael McKee, HCP’s lead director, as non-executive chairman.
HCP is the largest healthcare real estate investment trust in terms of market capitalization. The decision to terminate Flaherty is part of the board of director’s move to enhance the REIT’s governance strength by separating the chairman and CEO roles.
“The board believes Lauralee is the best choice to provide new leadership for the company and to execute its strategies to enhance long-term value for shareholders,” said McKee, who has been an HCP member for 26 years. “Jay was a substantial and successful force behind HCP’s considerable growth for more than a decade, and we wish him continued success.”
There were a number of factors that led to the management overhaul, McKee said in a conference call with investors and analysts, but ultimately it was a judgment call that has to do with seeking a change in leadership and leadership style—not about a new direction or new strategy for the REIT.
HCP has had four different chief financial officers and three general counsels since 2003, when Flaherty became CEO. Over the past few months, the board realized it had lost confidence in Flaherty’s leadership style, according to McKee, who said Martin “checked all the boxes” the board was looking for.
“It’s difficult because there were always a lot of pluses and a lot of good transactions and things we looked at over the years that we could applaud and be very pleased about,” he said. “At the end of the day, we came to this decision.”
Martin has served on HCP’s board of directors for five years and has left her position as chief executive of the Americas division of Jones Lang LaSalle, Incorporated. The opportunities in the healthcare space are compelling, she said, noting during the conference call that HCP is in “extremely good shape.”
“HCP is experiencing positive momentum, and achieving consistent financial results,” said Martin in a statement. “This is a pivotal time of challenges, transitions, and consolidation for the healthcare industry both here and abroad, driven by inescapable demographics and changes in new insurance legal framework.”
One of the things that attracted the board to Martin, according to McKee, was her experience in building teams and working with them to solidify and keep them together over long periods of time.
“My philosophy—I build teams,” Martin said on the conference call. “I build teams that are high quality teams that can perform at a much higher level because we work together. The only way you get the best answer is to get the best inputs, and then together working for the best solutions.”
Martin joined Jones Lang LaSalle as Chief Financial Officer in 2002, and was appointed to the additional position of COO in 2005 before joining the board of directors later that year. She has been a member of the Jones Lang LaSalle Global Executive Committee, and has chaired its Global Operating Committee.
In another management shake-up, Kenneth Roath, HCP’s Chairman Emeritus and the company’s first president, resigned from the board of directors on Sept. 27, announced Wednesday in an 8-K. He was HCP’s CEO and Chairman of the Board from 1988-2003.
Flaherty remains a member of HCP’s board of directors, a role which is served year to year. He was most recently elected during the annual stockholder meeting on April 25, 2013.
“It was really the executive change we were focused on,” said McKee in response to an analyst questioning why Flaherty was on the board of directors.
Because the reason for termination was not for cause or personal conflict, HCP says it will honor the remainder of his contract, including severance, which will be disclosed later this month in the third quarter earnings report.
Written by Alyssa Gerace
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