Why Oust a Good CEO?

Kerry Killinger, Dick Fuld, Marty Sullivan and Michael Ward.

One of these four CEOs could be shown the door, while the others are totally secure in their jobs. Who's on the hot seat?

If you guessed Ward, you are dead right. It doesn't matter that AIG (AIG - commentary - Cramer's Take) has plummeted 52%, Lehman (LEH - commentary - Cramer's Take) is down 70% year over year or that Washington Mutual (WM - commentary - Cramer's Take) has shed 80% of its value while CSX (CSX - commentary - Cramer's Take) is up 46%. Doesn't matter that the S&P is off 11% during the same period. The way I look at it, Ward's a goner if the 2nd Circuit Court of Appeals doesn't change the way it interprets the law that would allow the activist shareholders to replace enough of the board that would get rid of Ward.

First, this whole thing is really surreal. The TCI insurgents and their buddies wanted to put CSX in play as a private-equity leverage buyout. They weren't able to -- the market got toppy and the stock kept advancing -- so they decided to push for a gigantic buyback and a new CEO because they thought Ward was going a bad job against his competitors. In fact, not only has he not done a bad job, he's kicking everyone's butt in the industry; his company has been one of the strongest performers in the S&P

The issue in the court suit that was decided the other day by Judge Kaplan involved whether the dissidents had the right to vote all of the shares despite a lack of disclosure that was material and despite the judge's ruling that the dissidents have not told the truth about their stake-building and about their gang-up with other like-minded friends in the proxy war.

If the 2nd Circuit says that its interpretations of previous rulings do not apply, then I believe the dissidents will not be allowed to vote many of their shares, making it impossible for them to win.

The appeal, which Ward announced last night on "Mad Money," will determine if Ward loses his job. If they are able to vote their shares, I think Ward will lose, the rest of the shareholders will lose, and the system will loses.

It's something to keep an eye on when it comes to the mistaken judgment of greedy hedge funds and their goals and when it comes to the price of the stock, which I think could have a short-term pop if the dissidents win but then be a disaster -- Ward's done a great job in making CSX run well.

At the time of publication, Cramer had no positions in the stocks mentioned.

ALL JIM CRAMER BLOG ENTRIES | POST A COMMENT | READ COMMENTS  

---

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. To order Cramer's newest book -- "Jim Cramer's Stay Mad for Life: Get Rich, Stay Rich (Make Your Kids Even Richer)," click here. Click here to order "Mad Money: Watch TV, Get Rich," click here to order "Real Money: Sane Investing in an Insane World," click here to get "You Got Screwed!" and click here for Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he appreciates your feedback and invites you to send comments by clicking here.

TheStreet.com has a revenue-sharing relationship with Amazon.com under which it receives a portion of the revenue from Amazon.com purchases by customers directed there from TheStreet.com.