More CEOs Are Learning Who's the Boss

After WellPoint missed analysts’ earnings estimates for the second time in three quarters this summer and lowered its profit outlook, Royal Capital Management—which owned 837,800 shares, or less than 1 percent of the health insurer—took a step usually reserved for a company’s directors: The New York hedge fund demanded the ouster of Chief Executive Officer Angela Braly.

“She has, it is widely agreed, created a culture in which the financial forecasting process is manifestly dysfunctional, subordinates are openly (and rightly) critical of her performance, and a revolving door of senior management ensures these problems will persist,” Royal partners Robert Medway and John Lancefield wrote in an Aug. 22 letter to WellPoint’s board. “We implore you to take actions to regain investors’ confidence.” Six days later, WellPoint’s directors, who by then had arranged talks with several other dissatisfied investors including Barrow, Hanley, Mewhinney & Strauss and T. Rowe Price, announced Braly’s resignation. The board is now searching for a new CEO.