The future of Marsh--already in doubt with the appointment of a new CEO--is even murkier with the announcement just before Christmas that a change in leadership was ahead at the helm of its troubled parent company as well.

Michael G. Cherkasky, Marsh & McLennan Companies' embattled chief executive officer, will be leaving the company after his replacement is found, the firm announced on Dec. 21.

MMC's board of directors has initiated a search to replace Mr. Cherkasky. In a statement, MMC said the board "has determined a change in leadership will best enable MMC to move forward and enhance shareholder value."

Mr. Cherkasky won't be leaving empty-handed, however, as he is entitled to $19 million upon termination, according to a filing with the U.S. Securities and Exchange Commission.

"MMC's financial performance in 2007 has fallen far short of our expectations," said Stephen R. Hardis, nonexecutive chairman of the board. "The board has taken this performance into account and listened to concerns raised by some of the company's largest shareholders in recent quarters in making this change."

He added that "the board believes the full recovery of Marsh is essential to maximizing shareholder value in the most prudent and sustainable manner."

Mr. Cherkasky replaced Jeffery W. Greenberg in October 2004 after MMC was sued by New York's attorney general at the time (now the governor), Eliot Spitzer. In the suit, the company was accused of rigging bids and steering insurance contracts to certain carriers in exchange for kickbacks in the form of volume-based contingent commissions.

Mr. Cherkasky, who had a personal relationship with Mr. Spitzer dating back to the days when the two were prosecutors in the Manhattan District Attorneys Office, was the CEO of Kroll, the risk management subsidiary of MMC, at the time of his appointment.

After his appointment, Mr. Cherkasky settled the suit with Mr. Spitzer with a payment to aggrieved clients of more than $800 million. The company also agreed to give up contingent commissions, which amounted to more than $800 million annually at the time. MMC has yet to recover those revenues and Marsh has performed poorly as it continues to restructure.

As part of that restructuring, MMC hired Dan Glaser as chairman and CEO of Marsh a little over a month ago, replacing Brian Storms, who left last September. During a recent analyst conference call, Mr. Cherkasky took responsibility for appointing Mr. Storms and for the failure to turn around the ailing broker's fortunes.

However, in his comments, Mr. Hardis commended Mr. Cherkasky for his role in bringing MMC through a difficult period.

"MMC is a venerable institution that might not be here today were it not for Mike Cherkasky," according to Mr. Hardis. "His leadership and crisis management skills in the wake of the New York attorney general's action in 2004 enabled MMC to weather a perfect storm and positioned the company for future growth. We all owe Mike an enormous debt of gratitude for his invaluable contribution."

In a statement, Mr. Cherkasky said that "it has been an honor and a privilege for me to lead MMC through difficult times and position it for a successful future. This company has as fine a collection of people as I have ever worked with, and I am proud of what we have achieved in many areas."

In reaction to the news of Mr. Cherkasky's planned departure, Alan Karaoglan, with Bank of America, called the move "a positive step forward."

Creating further uncertainty is Mr. Karaoglan's comment that a "potential sale of the company is now possible" to unlock shareholder value, either via a sale of MMC in its entirety, or a spin-off of its operating units, such as Marsh.

David Small, an analyst with Bear Stearns, headlining his commentary, "Christmas Comes Early For MMC Shareholders," said investors have called for Mr. Cherkasky's removal for months.

He said the news may be an indication the company will report a poor fourth quarter, and predicted it will be at least two more quarters before any improvement is seen.

In addition, Mr. Small suggested that MMC was late in its actions. "Mr. Cherkasky should have been let go when [Marsh CEO Brian] Storms was let go, as it was clear then that his plan was not working," he wrote.

He went on to say that "to allow Mr. Cherkasky to choose a new CEO of Marsh was a mistake, in our view, as it should have been one of the most important decisions of a new MMC CEO. The decision to allow Mr. Cherkasky to choose a new CEO of Marsh when there were questions about Mr. Cherkasky's overall performance is surprising given his poor choices in terms of management throughout his tenure at the company."

Mr. Small added that "we wonder if in order to find the high-caliber CEO that is necessary to fix this organization," whether MMC's board "will have to allow the [new] CEO to hand-select a new leader for the overall Marsh business. This situation should lead to continued uncertainty within the organization..."

Special Reports /

Search Is On For New CEO With Cherkasky Leaving Marsh & McLennan

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