Challenged resume, net sink a CEO

RadioShack's chief is caught in `misstatements'

profit falls 62%

February 21, 2006|By BRENDAN M. CASE | BRENDAN M. CASE,THE DALLAS MORNING NEWS

DALLAS -- RadioShack Corp. chief executive David J. Edmondson resigned yesterday, after a tumultuous week in which he admitted to "misstatements" on his resume, announced sharply lower earnings and said the embattled chain may be forced to close up to 700 stores.

Claire H. Babrowski, a former McDonald's Corp. executive who joined RadioShack last year as chief operating officer, was promoted to acting chief executive, the electronics retail chain said.

She will oversee the troubled company's turnaround plan, which Edmondson unveiled last week.

Edmondson's resignation resulted from a mutual decision reached with the board, said RadioShack Chairman Leonard H. Roberts. Edmondson will receive a severance package in the neighborhood of $1.5 million, with specific amounts to be detailed in regulatory filings today, Roberts said.

Edmondson's departure spotlights how ethical considerations have become increasingly important in today's business environment.

The 46-year-old marketing whiz's rapid fall from the pinnacle of RadioShack's executive suite in Fort Worth, Texas, was marked by shifting messages from the company's board of directors.

On Feb. 14, after a news report questioning an entry on Edmondson's resume, the board offered its support to the CEO.

But the next day, Edmondson admitted he couldn't document his diploma and apologized.

The board then said it would investigate whether he had fabricated his academic credentials.

"One of the most important things we have as a corporation is integrity and trust. We know we have to restore that back to our company," Roberts said.

Edmondson said in a statement: "At this time the board and I have agreed that it is in the best interest of the company for new leadership to step forward, so that our turnaround plan has the best possible chance to succeed."

RadioShack, the venerable seller of mobile phones, batteries and other gadgetry, said Friday that poor financial results would force it to close up to 10 percent of its 7,000 stores.

Net income fell by 62 percent in the fourth quarter last year, when compared with the final quarter of 2004. The results capped a year in which profit declined sharply even as sales rose 5 percent.

RadioShack's share price fell 8 percent to $19.08 after reporting its financial results Friday. The share price has fallen by more than 25 percent since May, when Edmondson became chief executive. The stock has lost more than half its value over the past five years.

Wall Street's first opportunity to respond to the news of Edmondson's departure will come this morning because markets were closed yesterday for the Presidents Day holiday.

The resume uproar was ignited by a story in the Fort Worth Star-Telegram questioning whether Edmondson told the truth when he said he obtained two degrees from an unaccredited school called Pacific Coast Baptist Bible College.

The school, now in Oklahoma and called Heartland Baptist Bible College, said it could not find proof that Edmondson had finished his studies.

With Edmondson's resignation, RadioShack said it would halt the independent investigation of his resume. The board said it knew "some, but definitely not all" of the issues raised last week.

Babrowski, 48, the acting CEO, rose to become the highest-ranking female executive at McDonald's. Babrowski has no undergraduate degree, but she obtained a master's degree in business administration from an executive MBA program at the University of North Carolina.

Roberts, the RadioShack chairman, praised Babrowski's ability as a business executive. He also said the company had scrutinized her resume when it hired her. "She was fully vetted. I guarantee you, all our resumes are being vetted now," he said.

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