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ABBOTT SUCCESSION IS SUCCESSION OF DEPARTURES: PRESIDENT JACK SCHULER's

Executive Summary

ABBOTT SUCCESSION IS SUCCESSION OF DEPARTURES: PRESIDENT JACK SCHULER's resignation on Aug. 11 continues a tradition for heirs apparent at the $ 5 bil. diagnostics/hospital supply/drug business. Schuler, 48, is the third groomed successor to Chairman Robert Schoellhorn, 61, to leave the firm, following in the footsteps of current Biogen Chairman James Vincent and Genentech President Kirk Raab. The Abbott executive alumni group also includes a key player in the recent SmithKline Beecham merger, James Andress, who is slated to head half of that combined business. Indicating the tone of the resignation, Abbott said that Schuler's departure is "immediately" effective. The resignation was announced the day of the company's most recent board meeting. Schoellhorn is stepping back again to handle the chief operating officer functions as well as his current chairman and chief executive officer role. When Raab departed "effective immediately" in January 1985, Schoellhorn similarly took on the chief operating post until Schuler's ascension in 1987. The prolonged difficulties Abbott is undergoing in selecting, training and keeping a successor to Schoellhorn tarnishes an otherwise enviable performance by the company over the last decade. Abbott's steady and impressive growth has made it one of the most admired companies among money managers, as exemplified by its selection as one of the top 25 companies of the 1980's by the Financial World magazine at the beginning of 1989. Under Schoellhorn's tenure, Abbott has developed an image of a tightly controlled financial performer, similar to the sharp-pencil reputation that American Home Products used to have under William Laporte. Less apparent, but perhaps more important has been Abbott's ability to shift its corporate profile during the past 20 years to keep ahead. From primarily a drug business twenty years ago, the company expanded to become a dominant hospital supply business in the 1970's and the diagnostics leader in this decade. Schuler, who ironically had one year of seniority over Schoellhorn in terms of employment at Abbott, was one of the key architects of Abbott's growth in the diagnostics business. Prior to becoming chief operating officer, he was an exec VP with responsibility for the diagnostics and pharmaceutical businesses. He leapfrogged up the Abbott executive ranks after Raab's departure, becoming an exec VP in 1985 before assuming the chief operating spot in 1987. At the time of Raab's departure, Schuler was outranked by one long-time Abbott exec, Charles Aschauer, and was equal to two others: the top financial officer, Duane Burnham; and the head of Abbott International, Thomas Hodgson. Aschauer, Burnham and Hodgson remain in the Abbott heirachy. Burnham holds the vice-chairman position and Hodgson and Aschauer are exec VPs. In salary compensation for 1988, Schuler and Burnham were equals at the $ 790,000 annual level. Schuler served on the board with Schoellhorn, Hodgson and Burnham as an inside member. An Abbott spokesman said the company would not elaborate on a selection for Schuler's replacement beyond the Schoellhorn temporary assignment. The repeated annointments and dethronings of probable successors may make an outside search for a replacement more difficult. However, the current wave of mergers among major firms in the health care industry is creating a good pool of seasoned senior execs who might be available. While the past two Abbott outcasts have ended up as successful heads of biotech firms, Schuler may have some difficulty following that path. In at least one speech to the financial community, he stated a strong skepticism about the viability of biotech firms in the future. He maintained in November 1987 that the established drug firms with positions in organic chemistry had caught up with the biotech business and were positioned to outlast the start-up efforts.
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