CEO See-Ya!

Raymond Gilmartin, CEO of Merck Co.

The market is running with the bulls again, but there are still CEOs with targets on their backs. This time, with help from corporate governance specialists Glass, Lewis & Co. LLC, the ax falls on a once-respected exec who has hit hard times—Raymond Gilmartin, CEO of pharmaceutical giant Merck & Co.

Merck & Co.

CEO: Raymond Gilmartin
Tenure: 9 years

Total Shareholder Return*: -27.1%
Peer Index Return*: -13.9%
S&P 500 Index Return*: -9.1%
Total CEO Pay**: $17.6 million

Other Lowlights:

Gilmartin, once seen as a solid choice to run blue-chip Merck, has hit a rough patch. Patents are expiring on several key drugs, most crucially that of Zocor, its cholesterol drug. A plan to cut 5.7% of workers didn't impress analysts still smarting from a third-quarter profit drop and a cut in revenue estimates for Fosamax, one of Merck's top sellers. And on January 12, CSFB downgraded the company to "underperform," citing an "exceptionally thin" pipeline. Gilmartin, who's set to retire in 2006, is seeking a successor, but we think this company needs help, stat. A Merck spokesperson says the strategy is the right one to create long-term shareholder value.

*Data from Glass, Lewis & Co. and FactSet Research Systems for five years ending January 12, 2004. Peer Index Return includes companies with the same SIC code. Split-adjusted, includes dividend reinvestment.

**Total compensation includes salary, bonus, stock-option exercises, and all other long-term compensation for the past five years, excepting the value of options granted but not exercised.

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