Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, June 19, 1993 TAG: 9306210332
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: DANIEL HOWES STAFF WRITER
DATELINE: LENGTH: Long
Joseph E. Stephenson, president and chief executive officer of the $590 million company since 1989, stepped down at a regularly scheduled board meeting in Roanoke "to put this [controversy] behind us," one employee said.
Stephenson, 60, will be replaced temporarily as president and CEO by William R. Battle, 68, who led the Roanoke-based company from 1972 to 1989. Clifford A. Cutchins III, retired chairman and CEO of Sovran Financial Corp., will become chairman.
"Joe Stephenson has made many positive contributions to Shenandoah Life, not only during his tenure as our chief executive officer, but for many years prior when he was one of our outstanding general agents," Cutchins said in a statement.
Stephenson, who could not be reached Friday, has been active in civic affairs across the Roanoke Valley, heading the River Foundation - parent of the Explore Park - and serving as president of the Roanoke Regional Chamber of Commerce.
"No one in the company knew before this morning," a company spokeswoman said. "I think it's fair to say everyone was surprised, but everyone feels comfortable with Mr. Battle."
Stephenson's resignation comes five weeks after the company's board of directors - including Battle and Cutchins - received a nine-page letter from the company's General Agents Association. General agents are contracted by insurance companies to sell their products; general agents may hold contracts with more than one company.
"I'm sure the letter played some part" in Stephenson's resignation, Battle said in an interview. But the board's decision to accept the resignation "was by no means a reaction solely to the letter. We voted to accept his resignation in the best interest of the company."
Stephenson's exit also follows the company's posting of a $1.7 million loss in 1992, which then was cited by a key insurance-rating firm in its decision to cut Shenandoah Life's rating from A+ to A.
Telephone lines to Shenandoah Life agents in 20 states were buzzing Friday as word of Stephenson's exit spread. Stephen B. Shane, the Columbia, S.C., agent currently heading the General Agents Association, said, "it's too early for me to have any comment.
"We didn't have anything to do with it," he continued. "We weren't at their meeting."
But on May 10, Shane joined with the association's executive officers and board members in a detailed criticism of Stephenson's tenure that was mailed to each of the company's directors, including First Union National Bank of Virginia Chairman Warner Dalhouse, Carilion Health System President Thomas Robertson and Advance Stores Co. Inc. Chairman Nicholas Taubman.
"We are not frivolously coming to you because we do not like Joe Stephenson or there are some personal motives involved," they wrote. "To date, Joe Stephenson has ignored us as a unified field force and our concerns. We have now come to a unified decision and stand in total agreement that something must be done at once or our policyholders and Shenandoah Life are in danger."
The agents then enumerated their complaints with Stephenson, his style and certain members of his management team:
New insurance products - disability insurance and payroll deduction plans to pay for insurance premiums - were introduced, marketed and then abruptly killed.
"Many agents had geared up their sales efforts to produce business in [these] areas," they said. "What kind of signal [were agents] receiving when they were told about new and exciting ideas and commitments to a new product line and then shortly thereafter we are informed [those products] would no longer be available."
Stephenson's management style, described as "authoritative" and given to "micro-managing," was blamed for poor morale among workers at the Roanoke headquarters. "If Joe isn't in the home office, nothing gets done.
"There are many specific cases of home office employees who have either broken down and cried or said they have lost total confidence in Shenandoah Life and its direction," the agents wrote.
Some company insiders, however, dispute the agents' criticism of Stephenson's management style. "Some things were very clearly exaggerated to such an extent that it detracted from the impact of the letter," said one corporate official, insisting he not be identified.
The agents accused Stephenson of stonewalling their efforts to discuss terms of a new general agents' contract - one that still is under consideration. "It was obvious to us that he had a total disregard for our input and he would continue on in his same management style," they said.
Stephenson's apparent "lack of vision" led the agents to liken Shenandoah Life "to a ship listing back and forth with no captain and no direction." At their January association meeting, the agents asked Stephenson to draft a strategic plan for the company by March 1.
They described his seven-page response as having "absolutely no substance." In a subsequent meeting in Charlotte, N.C., Stephenson told the agents that the company's A.M. Best rating - a key rating used in the insurance industry to measure the health companies - had been reduced from A+ to A.
"For over a year, we have been talking about the company and keeping it strong and getting the right type of individuals, investment returns, etc. and in one short year our concerns were a reality," the agents told the board. "We feel the loss of our rating is directly attributable to Joe's disappointing leadership."
The company's investment manager "has a poor record and is overly concerned with safety to the detriment of overall return," they said.
"We regret that management has deteriorated to the point that this was necessary, but we feel [that] without some corrective action, we will be unable to continue placing significant amounts of business with Shenandoah Life," the agents wrote.
Shane and other officers of the agents association have consistently declined to discuss the letter or its allegations. First reached June 4, Shane said "the communication lines are open" between corporate executives and the agents' group. "As far as an insurance company is concerned, there is absolutely nothing wrong with it from a financial standpoint."
Rick Burleson, a Manassas-based agent who preceded Shane as president of the organization, said four days later: "The rest of us aren't going to have any comment. We're in the middle of negotiations on the letter."
Robertson, the Shenandoah Life director who heads Carilion Health System, was guarded when asked recently about the letter. "I think the board is taking it seriously and management is taking it seriously. There is obviously a communications gap, and that's all I'm going to have to say about it."
\ SHENANDOAH LIFE INSURANCE CO.\ \ A mutual insurance company, owned by its policyholders, whose dividends are\ determined by the company's financial condition.
\ Total Assets: $590 million, at March 31, 1993. Loss of $1.7 million in 1992\ Corporate employees: 225\ \ General agents: 200 operate agencies; another 550 agents work in the\ offices of general agents\ \ Operates in 20 states, primarily in the Southeast and Midwest\
by CNB