Thursday March 28, 11:33 am Eastern Time
Baxter's Harry Kraemer: "I Don't Golf"
Harry M. Jansen Kraemer Jr. was on his way to another boffo year as chairman and CEO of Baxter Intl. (NYSE:BAX-news) last summer when the reports of deaths started coming in. Virtually overnight, 11 people in Spain died after undergoing kidney dialysis using a blood filter made by Baxter. Then, a few weeks later, 21 kidney-dialysis patients in Croatia died within 48 hours of using the same Baxter device. By the time Baxter yanked its dialyzer from the market in mid-October, the filter had been implicated in more than 50 deaths, including a handful in the U.S.
Baxter has paid for these mishaps. After tracing the deaths to filters that had been rinsed with an improper fluid during production, the Deerfield [Ill.] medical-products and drug manufacturer took an aftertax charge of $156 million to cover settlements with the victims' families and the shutdown of two factories. The charge helped plunge Baxter into the red in last year's fourth quarter and depress its 2001 net income 17% from a year earlier, to $612 million on sales of $7.66 billion.
Kraemer has paid, too. The 47-year-old CEO thought it would be wrong to ignore the fatalities and take fat 2001 company bonuses. Despite the bottom-line hit from the faulty filter fiasco, Baxter met its 2001 financial targets, entitling Kraemer and other top executives to annual bonuses of up to 150% of their base pay. For Kraemer, a 22-year veteran of Baxter, that meant as much as $1.3 million, on top of his $880,000 salary. Instead, at his urging, the board cut the bonuses of the other Baxter execs to 80% of their base pay. As for Kraemer, he slashed his own bonus to 60%, effectively taking a 33% pay cut. ``The buck stops somewhere, and in this case, it stops here,'' he says.
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