Damage Control At IPG As Coughlin Decides To Bolt

The unexpected news on Friday that Interpublic Group COO and CFO Chris Coughlin has decided to leave after just a year cast a pall over IPG’s turnaround efforts, even as the holding company moved quickly to regroup at the top.

IPG dismissed speculation that the departure of Coughlin, who was seen by many, including Wall Street, as the likely successor to CEO David Bell, hinted at internal strife or unwelcome surprises yet to emerge. Still, it was hard to explain why Coughlin, selected after a rigorous search to be the architect of IPG’s financial revamping, would opt out of the company’s 36-month revitalization efforts.

“To see any type of top management change like this in the middle of restructuring is extremely unsettling,” said Lauren Rich Fine, an analyst at Merrill Lynch. “I think the timing is peculiar, coming right before the second-quarter earnings conference call.”

Last week, IPG’s board lost little time in devising a transition plan. Board member Michael Roth, 58, chairman and CEO of the MONY Group in New York and head of IPG’s audit committee, was named chairman, and svp of finance Robert Thompson, 51, whom Coughlin recruited last fall from his own former employer, Pharmacia, was promoted to CFO.

Bell defused concern about Coughlin’s exit, saying the CFO had worked closely with IPG’s treasurer, Steven Berns, and that his team will carry on his initiatives. In addition to Thompson, he cited vp, controller and chief accounting officer Nick Cyprus and vp of shared services Joe Sukola, among others.

“This group is already making major contributions to improving the infrastructure, the control environment, as well as the systems and tools with which we manage the financial performance of our company,” said Bell. “It’s a team that embodies Chris’ commitment to world-class financial standards.”

Some insiders contended that while Coughlin was successful in building his team, he never adjusted to the relationship-driven ad business. An example of that, some said, was his move last year to bring in McKinsey & Co. to identify ways to implement new financial efficiencies and streamline costs. Rankled IPG agency execs are said to have protested to top IPG brass recently that McKinsey’s influence had crossed over into structural areas, with the consultants offering corporate breakup strategies.

In addition, sources pointed to friction between Coughlin and Brian Brooks, IPG’s former chief human resources officer, who abruptly shifted to a consulting role in February. Brooks spent most of his time recruiting talent, while Coughlin focused on costs.

Another executive said Coughlin “never took to the ad business” and simply “didn’t have the heart for the amount of work required to complete the turnaround.”

Coughlin was vacationing in Bermuda last week and not available for comment beyond remarks he made to industry analysts in a conference call Friday morning. He said family interests and other personal pursuits triggered his decision to “retire” at the end of the year. “Over the next five years, the chief operating role would make extremely significant demands on my time and involve a great deal of global travel,” he said. “The more I thought about that, the more clear it became that I have other personal priorities that prevent me from making such a commitment.”

While IPG is not naming a COO replacement, Bell and Roth both stressed they will strike a comparable working partnership. “We get along well and enjoy working together,” Roth said. “As important, we have very complementary strengths and areas of expertise. As the company moves into the second phase of the turnaround, David’s time will increasingly need to be focused on Interpublic’s clients, its people and the competitive vitality of its brands. I look forward to helping free David to devote more of his talent to these important areas.”

Roth won’t join IPG until sometime in mid-July, pending the close of MONY’s merger with AXA Financial Services. In the meantime, the board is looking not only to fill Coughlin’s seat but to add at least two more directors, Bell said.

Trading volume on IPG’s stock swelled to 8.4 million on Friday, more than four times its three-month average. During the course of the day, the share price fluctuated from a low of $13.82 to a high of $14.06 before closing at $14, down 9 cents from the day before and well below its 52-week high of $17.31.