Resignation at a Fortune 500 company -- Coincidence? : LUSENET : TimeBomb 2000 (Y2000) : One Thread

This is circumstantial evidence, and it could just be a coincidence. But there has been a high-level resignation at a Fortune 500 company that starts its new fiscal year in February, and that may be behind in its Y2K repair work.

The other day I clicked on my bookmark that searches for CIO and CEO resignations...*+CEO+-AFL

...and found the following article on a major resignation at a Fortune 500 company:

Here's a quote from the article on the resignation:

"CINCINNATI (Reuters) - Federated Department Stores Inc. said on Wednesday that Russell Stravitz, chairman of its Rich's/Lazarus/Goldsmith's division since 1993, will resign that post effective Jan. 22.

"Arnold Orlick, 52, has been named chairman and chief executive officer of Rich's/Lazarus/Goldsmith's (RLG), effective Jan. 25. Orlick has served as president and chief operating officer of the 75-store, Atlanta-based division since May 1997.

"Stravitz, 50, has spent his entire 30-year retail career with Federated (FD) and will take time off to assess future career options."

Who or what is Federated Department Stores? Here's a quote from Hoover's about them:

"Perhaps best known for its Bloomingdale's and Macy's chains, Federated Department Stores is the largest upscale department store retailer in the US. Its collection of some of the most prestigious names in the industry also includes Lazarus, The Bon Marches, Burdines, Stern's, Rich's, and Goldsmith's. Federated operates some 400 department stores in 33 states."

The name Federated sounded extra familiar to me for some reason. On a hunch, I checked the list I compiled in November of the 28 Fortune 500 companies that enter their new fiscal year on February 1, 1999...

...and found out that Federated IS one of the 28 companies that start a new fiscal year on February 1st. My next step was to check Federated's SEC 10-Q filing to get an idea of how far along their Y2K work is. Here's the web site for their December 15, 1998 SEC filing and some quotes from it on their Y2K progress:

"In February 1996, the Company commenced an assessment of the potential effects of the Year 2000 issue on the Company's business, financial condition and results of operations."


"The company commenced testing of such remediated systems for Year 2000 compliance in August 1998 and presently anticipates completing a comprehensive, integrated test of all main-frame and mid-range IT systems (including third-party and propriety hardware, software, network components and interfaces) by January 31, 1999."


"Non-IT Systems. The Company has undertaken a review of its non-IT systems [embedded systems]and is in the process of implementing a remediation program in respect of such systems that are within the control of the Company. The Company expects to complete this remediation effort by April 30, 1999."


"The Company has incurred to date [December 15, 1998] approximately $21 million of costs to implement its Year 2000 compliance program and presently expects to incur approximately $50 million of costs in the aggregate, of which approximately 25% represents capitalized expenditures for hardware purchases."

The $21 million out of $50 million figure did not sound as if much compliance work had been done yet. Even if $12.5 million were going towards embedded systems, $21 million spent so far on the way to, let's say, $37.5 million, wasn't good for a project that's supposed to be done by January 31, 1999.

But I thought I should be fair to Federated. Perhaps they're spending money rapidly and will have their Y2K work done soon. How to check that. Ah! How much had the company spent on Y2K work according to the previous SEC filing from September 15, 1998? Here's a link to Federated's previous SEC filing and a quote:

"The Company has incurred to date approximately $16 million of costs to implement its Year 2000 compliance program and presently expects to incur approximately $50 million of costs in the aggregate, of which approximately 30% represents capitalized expenditures for hardware purchases."

The company had spent $5 million on Y2K work between September 15 and December 15, 1998. $21 million had been spent as of December 15, 1998. The company estimates that they will have to spend a total of $50 million to complete all of their Y2K work. If a rate of $5 million is spent each three months on Y2K, how long before the project is finished? I'll let you do the math on that one.

So, what do we have here? The chairman of a major division of a Fortune 500 company is resigning his post effective January 22, 1999 at the age of 50, and will be "taking time off to assess future career options." The company starts its new fiscal year on February 1, 1999. The company had spent $21 million by December 15, 1998 out of the $50 million it plans to spend spend on Y2K, and appears to be spending about $1.7 million per month.

There are many coincidences here that are...interesting. All of this could just be circumstantial. What I do know is, of those 28 Fortune 500 companies that I'll be closely following in February, I'll be looking at Federated Department Stores even more closely.

-- Kevin (, January 10, 1999


Kevin, this is really superior research! You get an A+ for this one.

Anita E.

-- Anita Evangelista (, January 10, 1999.

Let's see - 500 companies, and assume an average tenure as CEO of 10 years (probably high) and you'll have to have an average of 3 resignations per month. I wouldn't read anything into it.

-- Ned (, January 10, 1999.

Excellent research job Kevin!

And a superb illustration of "how to" do it for forum posters.

Yes, it's a possible trend indicator. We'd need lots more data points to "call" a trend. But, I do think you've got something there.

In analogy, at one point is was hard to call Y2K a problem or a trend. Now the data points are ramping up exponentially.

Good work!


-- Diane J. Squire (, January 10, 1999.

Superb job Kevin!!!

Maybe you should set up a CEO/CIO "Bail Out League Table/Hall Of Shame!"


"The conveniences and comforts of humanity in general will be linked up by one mechanism, which will produce comforts and conveniences beyond human imagination. But the smallest mistake will bring the whole mechanism to a certain collapse. In this way the end of the world will be brought about."

Pir-o-Murshid Inayat Khan, 1922 (Sufi Prophet)

-- Andy (, January 10, 1999.

""Stravitz, 50, has spent his entire 30-year retail career with Federated (FD) and will take time off to assess future career options." "

While I applaud Kevin's research, I think the above info sums it up. 30 years is a pretty darn long career. He started witht he company when he was 20 for God's sake, ever think he just might want a change of venue? Plus, when you hit 50, a lot of times new benefit packages kick in for your departure, and taking your leave after Jan 1 puts you n a new tax season. It makes a lot of sense to me. I am not saying that this is what happened for sure, but there is no certainty it was due to Y2K either.


-- Rick Tansun (, January 10, 1999.

You're right Rick, it's a little like trying to pick out the Jo Anne effect from normal year-end glitches, obviously you would need to examine the stats. over the last few years compared to this year.

Personally, I expect alot of bailing at the end of '99, if only to avoid lawsuits.

-- Andy (, January 10, 1999.

Kevin, Thanks for the very imformative post although I don't necessarily beleive the resignation is Y2K related. Keep a watch on it though and keep this type of well investigated material coming. You might just give Diane a run for her money for Chief Imformation Officer of this forum. You just need to post another 500 just like this in order to overtake her for my vote. But then again she would have to go on vacation for six months. Mike

-- flierdude (, January 10, 1999.

Sorry I don't have a ref (maybe WSJ or LA Times a few weeks ago), so take this for what worth:

Members of corporate boards of directors finding it more difficult to get insurance and terms in insurance to cover liabilities stemming from Y2K problems. Personal liability. Not an "act of 'God'". So they are quitting.

Which is as it should be. The turkeys have either ignored Y2K for years and/or have created a corporate climate where the peons can't bring potential problems (such as Y2K) to the attention of management without being considered troublemakers.

-- Mr. C. (, January 10, 1999.

Kevin our investigative news hound. You're a gem alright. All I can do is pay you back in praises and gratitude for such excellent work.

Rick you have a very good counterpoint which is just as invaluable. But Kevin unearthed something that is worth keeping a watch on.

-- Chris (, January 10, 1999.

Y2K Time Out.

Heres a CEO resignation for you Kevin. Chuckles. -- Diane

CEO Quits Job Over UFO Views Advances in technology a gift of aliens, Silicon Valley pioneer believes

Jon Swartz, Chronicle Staff Writer Saturday, January 9, 1999

... ``Why would a young, successful CEO risk his reputation on something this fantastic?'' he asked. ``Because I believe so much in this theory. And I am in a unique position to communicate an extremely important message. I have the money, credibility, scientific grounding and faith.''

...``It's the Flat-Earth society mentality all over again, and I'm here to prove my theory is real,'' he said. article.cgi?file=/chronicle/archive/1999/01/09/MN19158.DTL

-- Diane J. Squire (, January 10, 1999.

The thread about that, where an in-depth article is posted, is:

WHAT Is This? Is It For Real?

Guess Diane didn't see our suggestion ;-) which would be kinda neat, don't see why not.

xxxxxxx xxxxxxx xxxxxx

-- Leska (, January 10, 1999.

I just received an E-mail that needs to be acknowledged. The author of it brought up some points that need to be addressed:

"I understand your enthusiasm for providing information you feel is useful to people. I applaud your efforts. I also have an impression that you are a fair person. In this case, I think you may have unfairly characterized someone as a quitter, without any facts.

"This man has worked for the company for 30 years. His perseverance probably earned him the top spot. Without knowing anything else, I don't think he's the type of person to 'bail' at trouble."

The point is well taken. I hope nobody took my post and this thread as a comment on Mr. Stravitz's character or his intentions. This example was my way of saying, "Is it starting?"--the wave of resignations that will become more and more common as 1999 goes on, and the economic disruption that all sectors of the economy will experience.

My posting is a sort of Y2K barometer, a way to get a sense of how Y2K will play itself out in 1999 and 2000, and showing people internet tools they can use to decide how much personal preparation they feel they need to make for themselves as events play themselves out.

Actually, my first thought was that if the resignation is Y2K related, it could very well mean that the man wants more time to make preparations for himself and his family, so that they'll be able to deal with hard times in late 1999 and 2000.

-- Kevin (, January 10, 1999.


After looking at the article on Firmage resigning because of his UFO beliefs, it occurred to me that name was familiar. I heard that guy on the Art Bell show Friday night. He resigned Friday afternoon, immediately before going on the air!

-- (, January 10, 1999.

"Actually, my first thought was that if the resignation is Y2K related, it could very well mean that the man wants more time to make preparations for himself and his family, so that they'll be able to deal with hard times in late 1999 and 2000. "

That's the impression I got from it too. It's not farfetched, and it doesn't lower the man's character in my view. I expect resignations when it becomes fully apparent to CEO's, like it is to me, that it's all hopeless, and that they need to free themselves to attend to what's really important, the bottom line of most carreer; one's family's well-being. Other obvious business reasons as to the timing is simply marginal.

On the other hand, I'm also not surprised at indignent responses to your post, due to what it could imply about the CEO, as it is very public and viewed by millions over the world.

It is an important barometer to watch CEO's, another useful tool to our understanding, and as such it shouldn't be condemned.

We don't know exactly why he quit, we don't know exactly why Celine Dion is retiring this year, we don't know exactly why many other well known and influencial people retire this year and already have retired, as we can't read their minds and have to rely on official statements. But combined, because it is very close to the rollover, as flawed as this barometer is, it gives us something else to go on.

-- Chris (, January 10, 1999.


I also heard Firmage on Art Bell. The man is, without a doubt, incredibly talented and intelligent. He is also young and rich and has placed his reputation and future on the line for his beliefs. That was a great interview Art did with him.

Mike ==================================================================

-- Michael Taylor (, January 10, 1999.

In the interest of fairness, here is what Mr. Stravitz himself had to say about his resignation. This is from a press release I just found while I was at Federated's web site:

"After three decades of intense activity and responsibility within Federated, I am looking forward to taking some time for myself and my family before determining what I want to do with the next stage of my life," Stravitz said. "The last five years at Rich's/Lazarus/Goldsmith's have been rewarding; it's a wonderful organization and I am proud of what we have accomplished here, including successful divisional consolidation and the strategic growth of our stores in our key markets. I think now is a good time to step back and assess what I want to do next."

-- Kevin (, January 11, 1999.

Michael and infoman,

Go check out his web-site. In-ter-rest-ing! -- Diane< /a>

Kevin, keep watching, happen to think youre probably right on, as usual.

Suggestion Leska? So FAR behind on my thread reading! E me if somethings real key, okay?


-- Diane J. Squire (, January 11, 1999.

Sheesh! Hate it when that happens. Link works.

-- Diane J. Squire (, January 11, 1999.

WHAT Is This? Is It For Real?

Diane, read this thread! And scroll to the bottom too ;-)

xxxxxxx xxxxxxx xxxxxxx

-- Leska (, January 11, 1999.

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