Cerner Corp. is restructuring its board of directors as part of an agreement with Starboard Value, an activist investment fund that owns roughly 1.2% of the company's outstanding stock.
The "board refreshment" involves changing more than half of the company's board since 2017, according to a news release announcing the plan Tuesday.
"I, along with our entire board and leadership team, have been reviewing Cerner's operational and financial performance to identify opportunities to unlock the company's significant potential," Brent Shafer, who joined Cerner as chairman and CEO in 2018, said in a statement.
Cerner reported $774.8 in operating earnings for its fiscal 2018, down 19% from one year prior, and $5.4 billion in revenue, up 4% from 2017.
"We are focused on effectively implementing a refined operating model to improve efficiency and profitability," Shafer added.
Four new directors are joining Cerner's board: John Greisch, former president and CEO of Hill-Rom Holdings; R. Halsey Wise, former chairman and CEO of MedAssets; Melinda Mount, former president of AliphCom; and George Riedel, former chairman and CEO of Cloudmark and a former senior partner at McKinsey & Co.
Dr. Denis Cortese, president emeritus and CEO at Rochester, Minn.-based Mayo Clinic, will retire from the board at the end of his term and will not stand for re-election.
Cerner also plans to create a finance and strategy committee within its board to oversee a host of operational improvement initiatives, including a series of changes to its organizational structure. These changes include eliminating the president role at Cerner. The post was most recently held by Zane Burke, who stepped down from the title in 2018 and now leads the digital health company Livongo as CEO.
Another operational improvement initiative involves targeting an adjusted operating margin of 20% in the fourth quarter of 2019. In 2020, the company plans to increase its adjusted operating margin to 22.5%.
Cerner's board also approved an expanded stock repurchase program, under which the company can buy back an additional $1.2 billion of its common stock. Cerner said it will fund the repurchase program with cash from operations and by issuing debt.
"We are pleased to have reached this agreement with Cerner, which includes a meaningful refreshment of the board, as well as important steps towards implementing operational improvement initiatives that will drive profitable growth," Peter Feld, managing member of Starboard, said in a statement.
Cerner's shares rose more than 10% on the news by 2 p.m. ET Tuesday.
