Crisis Management Lessons From the Valeant Debacle

Valeant Pharmaceuticals International Inc. announced plans to launch a search for a new CEO and to add activist investor William Ackman, CEO of Pershing Square Capital Management LP, to the board. Pershing Square’s vice chair joined the Valeant board earlier this month along with two other incoming directors. Pershing Square, which holds a 9% stake in the company, has suffered losses from Valeant’s nearly 90% drop in share price since August, the Wall Street Journal reports. Valeant’s performance struggles are the result of its unsustainable business model, a potential debt default, and accounting issues, according to the Economist. The company is hoping that changes to the board and management will help it regain credibility and demonstrate a desire to right itself. Meanwhile, former CFO and current director Howard Schiller was asked to resign from the board after allegations of “improper conduct” related to his involvement in an accounting irregularity currently under investigation; Schiller denies the accusations, however, and has refused to step down from the board. Directors might use this multi-faceted crisis to consider how their own boards could prepare for a “perfect storm” of financial restatements, alleged leadership misconduct, CEO turnover, and a sustained activist investor challenge. (NACD)