As the completion of the union between Synthes Inc. and Johnson & Johnson (NYSE:JNJ) draws near, there’s an awfully good executive sitting on the sidelines: former Stryker (NYSE:SYK) CEO Stephen MacMillan.
Rumors are a-swirl that MacMillan, whose hasty exit from the Kalamazoo, Mich.-based orthopedic company earlier this year was precipitated by a personal relationship with a fellow employee, has been angling for a senior management position at the New Brunswick, N.J.-based healthcare conglomerate. He’d seemingly be a great fit to run the now vastly expanded orthopedic operation at Johnson & Johnson, which is fixing to pay a $21.3 billion dowry for Synthes and its orthopedic trauma business.
But there’s a sticky wicket in the 2-year non-compete clause Macmillan signed with Stryker in his February 2012 separation agreement, which paid him $5.5 million in cash and the rights to purchase nearly $65 million worth of stock options.
Under the terms of that agreement, which forbids MacMillan directly or indirectly to "own, manage, operate, join, control, be employed by, or participate in the ownership, management, operation or control of, or otherwise be connected in any manner with, including, without limitation, holding any position as a shareholder, director, officer, consultant, independent contractor, employee or partner of, spokesman for, or investor in, any business which is competitive with (x) the businesses of the company or any of its subsidiaries or affiliates," according to a regulatory filing.
Seems pretty iron-clad, but there’s a caveat in the non-compete that could open the door for the former CEO to join J&J immediately.
MacMillan’s agreement does not cover "providing services to a competitor, the business of which is diversified and includes at least 1 business unit which, standing alone, would not be a competitor (a ‘non-competing business unit’), and the executive’s services relate solely to one or more non-competing business units."
That means MacMillan could work for Johnson & Johnson, but not directly for its orthopedic businesses, as long as he gives Stryker "written assurances satisfactory to the company that indicate that the executive will not, directly or indirectly, provide services other than to one or more non-competing business units for a period of 2 years."
Whether JNJ, which is looking to make hay immediately with the assets it’s acquiring from Synthes after waiting more than a year for regulators to green-light the deal, wants to spend time interviewing MacMillan for a non-orthopedic unit remains to be seen. But there’s a hole in JNJ’s unique corporate structure that the former Stryker CEO could fill right away.
During the final years of William Weldon’s tenure, J&J instituted a vice chairmanship structure to run the company’s two distinct business units – medical device and pharmaceuticals/consumer products.
Weldon retired earlier this year, handing the reigns to vice-chairman Alex Gorsky, who ran the company’s medical device unit. Fellow vice-chairwoman (and erstwhile contender for the corner office) Sherilyn McCoy left JNJ to take the helm at cosmetics maker Avon Products (NYSE:AVP) in April. And with Michael Mahoney, formerly the #2 man in the J&J medical device operation, slated to assume the CEO role at Boston Scientific (NYSE:BSX) in the fall, there’s surely room for MacMillan and his decades of experience somewhere in the mix.