Coastal Physician Group founder Steven Scott, M.D., who was ousted as president and chief executive officer in May, has gained control of the company's board of directors.
Official results of a proxy contest announced last week gave Scott's two nominees about 53% of the votes cast. They defeated two directors recommended for retention by the existing board.
Votes were cast representing 87% of eligible shares. Scott had the advantage of owning 30% of the total stock; associates of his controlled enough of the other shares to make up a majority.
Both Scott and current President and CEO Joseph Piemont called for a spirit of cooperation to help the company regain its financial footing after more than a year of losses and plummeting share value.
That could be tough given the mud-slinging before the vote. Both sides filed lawsuits accusing the other of breaching fiduciary duties.
"Now is the time for everyone at Coastal to rise together as a team to meet the challenges and pursue the opportunities ahead of us," Piemont said.
Scott, who remains a board member, said he does not want to run the company. However, he said he would like stronger management and might call for Piemont's replacement if the company is not sold in a few months.
"I have said very clearly, privately and publicly, that I will not return as president and CEO under any circumstances. I am an entrepreneur. I enjoy growing things. That is my skill base," Scott said.
During the proxy fight, Piemont and board Chairman Jacque Sokolov, M.D., accused Scott's nominees, Mitchell W. Berger and Henry J. Murphy, of conflicts of interest, including personal loyalties to Scott. They said Berger and Murphy, along with Scott and two other Scott supporters on the nine-member board, would constitute a majority.
Scott said he was happy with the results of the vote, but denied he will control other directors. He said Berger and Murphy are "very independent, very experienced.
"We want to get on with the healing process and bring the board together to stabilize the environment for the employees and the patients and the customers," he said.
As for the lawsuits, Scott said: "I'm sure all parties hope they would go away as soon as possible."
Coastal has been trying to regain its hospital customers. In 1995, Coastal had 375 contracts to manage emergency departments-more than any other company, according to MODERN HEALTHCARE's 1996 Contract Management Survey (Sept. 2, p. 61).
However, that business has eroded. As of last week, the company had 294 contracts.
Current management has been trying to sell noncore businesses.
For instance, in September, Coastal completed the sale of its capitated clinic operations in Maryland and reached an agreement to sell its primary-care clinics in New Jersey. The proceeds from the sales are expected to help it meet 60% of its debt obligation, due in January.
However, Scott prefers to sell the entire company. Shareholders approved a nonbinding resolution, drafted by Scott, that called on the board to establish a committee to seek ways to maximize shareholder value, including a possible sale of the company.
Scott said if the company can't find a buyer willing to pay a good price, his No. 2 choice would be to look for a strategic financial partner to infuse it with capital during its turnaround. His third choice would be selling individual business units.
Coastal stock traded around $5.50 last week on the New York Stock Exchange, with little change.