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The role of the board of directors

Was the board too soft on Rite Aid's CEO?

"The firing this week of Rite Aid Corp. Chairman and Chief Executive Officer Martin Grass underscores, yet again, a basic business tenet: There's a big difference between making a company grow and making it run.

In four years since taking the helm from his father, the 45-year-old Mr Grass proved masterful at acquisitions, more than doubling the size of the drugstore chain to nearly 4,000 outlets and snagging the big prescription-benefits manager PCS Health Systems for $1.5 billion earlier this year. But when it came to managing this behemoth, the self-assured Mr Grass proved relatively clueless. With his departure, the eldest son of company founder Alex Grass leaves behind a legacy that is just short of disastrous ...

Investors and analysts who were given scant access to the company under Mr Grass's reign are now calling into question the performance of Rite Aid's board. Not merely inactive in the face of Mr Grass's miscues, some board members aggressively defended him amid criticism from investors, analysts, suppliers and former executives. In fact, it was the company's bankers, rather than its board, that led the push to oust Mr Grass."

Source: Robert Berner and Mark Maremont, "Lost Heir: Fall of Rite Aid Chief Has Critics Wondering: Where Was the Board?," The Wall Street Journal, October 20, 1999.

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