Moment of Truth?

Report From the Past.

It has been a tortuous year for Harry M. Jansen Kraemer Jr., CEO of Baxter International Inc. Back in November 2002 ("Harry Kraemer's Moment of Truth"), we lauded Kraemer's forthright leadership as his company confronted the deaths of 53 patients due to contaminated dialysis filters made by a Baxter subsidiary. Now Kraemer is out of a job.

"Given the challenges the company has faced during the last year, I felt it was best for Baxter that I step down at this time," Kraemer said in a January 26 statement. That was three days before Baxter delivered an estimate of 2004 profits that was 14% lower than analysts had expected. It was the fourth time in 15 months that Baxter had disappointed Wall Street—and for Kraemer, the last.

Most investors don't blame Kraemer for the weakening business results, a function mostly of price pressure in Baxter's blood-products division. But some say the CEO's stature was tarred by a flow of what they consider misleading projections—especially given Kraemer's vocal insistence, as during the dialysis-filter crisis, on transparent and honest corporate communications. "Certainly, our credibility has suffered," Kraemer wrote in an email. Last July, in fact, the Securities and Exchange Commission launched an inquiry into Baxter's financial forecasting, which hasn't been resolved.

Baxter also still faces a probe, revealed last March, by the U.S. Attorney's office in Chicago into the 2001 filter deaths. All of which leaves Kraemer facing the prospect of a muddied legacy. "The progressive values, culture, and business practices that have been in place at Baxter for a decade," he emailed, "will continue to be an important part of the company's fabric after I leave." But will employees and investors remember that Kraemer tried to "do the right thing," as he so often put it? Or simply that he didn't make the numbers?

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