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Caremark's Boardroom Break

Its lead director was on the road amid a nasty takeover battle.



lead director, Roger Headrick, is sporting another black eye.

This time, the shiner came from a Delaware judge who would like to see Headrick explain his recent actions. Headrick and his fellow Caremark board members have unanimously endorsed an unpopular merger with


(CVS) - Get CVS Health Corporation Report

while altogether shunning a competing -- and potentially better -- offer from rival pharmacy benefit manager

Express Scripts


. The directors face bruising criticism as a result.

But that's not why the judge is asking for an explanation. Last week, Delaware State Chancellor William Chandler found himself musing about the director's whereabouts instead.

After Headrick's lawyers tried to change the director's deposition schedule with Express Scripts' lawyers, Chandler upheld the original schedule -- and expressed some irritation at having to do so.

You "offer no explanation regarding director Headrick's reasons for being in New Zealand or 'difficult to reach' during an especially critical period in the life of the company on whose board he serves," Chandler wrote Thursday. "The Court can only surmise that the reasons were personal in nature.

"That does not suffice as a reason to require a flock of lawyers to travel to a location convenient to a single director of a public company," the judge continued, "especially when the inconveniences of a directorship are part of the job."

Caremark didn't respond to requests for comment. But for Headrick, the inconveniences of part-time work on the Caremark board have paid off handsomely.

As one of Caremark's longest-serving directors, Headrick has seen the company through both good times and bad -- with a core business going bankrupt early on -- and picked up plenty of valuable stock options along the way. His current stake in Caremark, including stock and options, is worth more than $150 million right now.

By now, Headrick is no stranger to controversy. Indeed, he seems to come under attack wherever he goes, whether he's running the fierce Minnesota Vikings or scrambling to save the lovable Pillsbury Doughboy.

His record at those places could offer some guidance to Caremark shareholders searching for clues about his role in the CVS-Express Scripts battle.

Losing Streak

Back in 1998, with Caremark struggling to survive, Headrick moved to capitalize on another investment instead. To the relief of many -- who disliked his management style -- Headrick decided to sell his stake in the Minnesota Vikings.

After seven rocky years at the helm, Headrick walked away with plenty.

"The Vikings have been very, very good to Roger Headrick," the local


wrote in the summer of 1998. "They've raised Headrick's profile, provided him with his first opportunity to be the CEO of a business of any real size and contributed mightily to his net worth.

"His 10% share of the team could be worth $20 million in a sale, which probably represents the largest part of his wealth."

Red McCombs bought the whole team for $250 million a couple of months later and, in one of his first acts as the new owner, shoved Headrick out the door. In fact,

The Atlanta Constitution

reported at the time, Headrick's replacement actually had the locks changed before Headrick could even pack his things and leave.

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Still, some football greats would have been happier if Headrick had never arrived on the scene at all. Gary Zimmerman, a former All-Pro tackle for the Vikings, spent just two years working under Headrick before quitting in frustration.

"When Roger came in, I thought everything was focused around the dollar," Zimmerman explained to the

Rocky Mountain News

in 1993. "They took all the perks from the coaches. They told the groundskeeper he was paid 80% more than he's worth. ... They just treated people like dogs."

Zimmerman got fed up and rushed off to play for the Denver Broncos instead. He basically blamed Headrick for everything.

"I think the players backed me because I stood up against him," Zimmerman told the

Rocky Mountain News

. "Some of those guys feel the same way I did, but they weren't in the position to do what I did. ... I wouldn't mind meeting

Headrick on a street in Denver" right now.

'Just Say No'

Headrick left behind some angry folks at Pillsbury as well.

Headrick served as Pillsbury's CFO through much of the 1980s, when the company's lackluster performance opened the door for a hostile takeover. Grand Metropolitan, a British-based liquor concern, pounced with a generous bid welcomed by shareholders but snubbed by senior management. The situation, as portrayed by

The Wall Street Journal

in late 1988, sounds strikingly similar to Caremark's current standoff now.

Like Caremark, Pillsbury faced an unwelcome offer from a smaller company that was promising significant returns. Moreover, like Headrick, one of Pillsbury's most powerful directors had left the country -- sailing aboard a cruise ship headed for the Far East -- during the crucial battle. The director, former Pillsbury CEO William Spoor, returned to join Headrick and other company leaders in fighting off Grand Met but ultimately gave up in the end.

In a detailed review of that saga,

The Wall Street Journal

compared Pillsbury's approach to some misguided political strategies of old.

"It marked the first -- and quite possibly the last -- test of what has been dubbed the 'Nancy Reagan' defense to an unwanted takeover bid: 'Just say no,'" the


observed. "Indeed, as Pillsbury's campaign for survival drew to a close, a Grand Met adviser likened its strategy to that of Walter Mondale's doomed 1984 campaign against Ronald Reagan -- 'hoping the opponent will get sick.'"

A decade later, with Pillsbury faring well under its British owners, the


offered a telling detail about Headrick's final moves at the company. Notably, the newspaper reported, "Headrick was involved in crafting rich severance packages for outgoing Pillsbury brass."

Now Caremark directors have come under fire for handsomely rewarding their own outgoing executives. But Headrick might have to explain himself this time around.

Last Thursday, Chandler issued a court order requiring Headrick to show up for a deposition even though he must fly across the country -- after returning from a journey halfway around the world -- to do so. Quite simply, Chandler pointed out, Caremark has little time to waste.

A special shareholder meeting that will help decide Caremark's fate looms just two weeks down the road.

"The incredibly compressed schedule under which accelerated discovery must occur in this coordinated proceeding is entirely the result of defendants' decision to advance the shareholder vote on the proposed CVS/Caremark transaction," Chandler wrote. Meanwhile, "regarding the physical hardship of flying from California to the East Coast (which is the principal objection raised by defendants' counsel), I have personally experienced the physical hardship of flying coach class on 'red eye' transcontinental and transoceanic flights and can empathize with Mr. Headrick.

"But given the exigencies of this litigation, it is something that he will have to grin and bear."