Healthways co-founder and former chairman and CEO Tom Cigarran has abruptly resigned his seat on the company's board, saying the wellness services provider needs to change its focus and direction to capitalize on the opportunities in a changing health care market.
Cigarran's move comes as Healthways faces a stiff challenge to its strategy and governance from hedge fund North Tide Capital, which owns 11 percent of the Franklin-based company and last month said it plans to nominate its own slate of directors this spring. Cigarran was one of four directors up for re-election and his break from the board suggests there had been a number of intense conversations about Healthways' direction even before North Tide principal Conan Laughlin last fall called for CEO Ben Leedle to be fired.
Here is Cigarran's letter in full:
It is with great regret that I resign from the Board of Directors of Healthways, Inc effective immediately.
Over the last 3 years, I have tried directly through you, at board meetings and directly with our CEO to have the necessary steps taken to improve the company's unacceptable operating and financial performance.
Healthways is very well positioned strategically, has many great and dedicated people and can still become not just a good but a great company. As a director and shareholder, I do not believe this can be accomplished without changes in company focus and direction. I am no longer willing to continue as a director and watch this company fail to meet its potential and the reasonable expectations of its shareholders.
/s/ Thomas G. Cigarran
In a statement, Healthways Chairman John Ballantine lauded Cigarran's contributions to Healthways, which he helped launch in 1981 and led from 1989 to 2003. Ballantine also said the rest of the board had asked him to stand for re-election despite the company's governance guidelines that call for directors to resign at age 72. He did not address Cigarran's point about trying to change Healthways' strategies.
"The Board is surprised that he has chosen not to continue to work with his fellow directors to enhance shareholder value in the rapidly evolving healthcare industry, especially given the market adoption of the Company’s well-being improvement solutions," Ballantine said. "The Company just executed one of its most successful years of customer retention and new sales, leading to expected growth in all of its customer markets for 2014. As stated in December, the Board maintains its full support of the CEO and the management team and is fully aligned with management on the Company’s strategy. The Board intends to continue the process already underway to identify and nominate a new director who will bring current experience and relevant expertise."
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