Boston Scientific and the Road to Ruin
How greed, incompetence, and arrogance brought the world’s leading medical device company to its knees.
This spring, Boston Scientific cofounder Pete Nicholas took to the stage at the end of a shareholders meeting to deliver “a few words.” Nicholas began his remarks by reminiscing about 2004, the 25th anniversary of the Natick-based medical device powerhouse. Back then, he said, Boston Scientific was the “unambiguous leader” in its industry, universally acclaimed for its phenomenal success and place “among the top 100 most valuable companies on the New York Stock Exchange.”
The 50 or so suits scattered in the largely empty downtown Boston auditorium remembered the time well: The company’s stock that year hit an all-time high of $45 a share.
But then Nicholas recalled the years that followed: the company getting sanctioned by the FDA; seeing the market for its devices stall; and making what has since been dubbed the second-worst acquisition in the history of corporate America. Along the way, Boston Scientific’s stock price slid into single digits.
Nicholas’s comments were direct and honest, but it would have been difficult for any executive to put into words just how severe the turn in the company’s fortunes had been. Boston Scientific prided itself on being an innovative force that pushed the possibilities of medical technology. But that ambition also fostered a culture that on too many occasions had pushed beyond legal, ethical, and financial boundaries. Fed by hubris, testosterone, ego, and greed, the company slogged through a now-legendary string of operational and strategic blunders, quality-control problems, and allegations of outright corruption. “What’s next?” a Wall Street analyst had asked in the middle of it all. “Locusts?”
Actually, with respect to Nicholas’s attempts to revitalize the company’s battered image, a plague might have been preferable to what he was about to announce. Standing behind Nicholas, listening to a speech that had quickly turned gloomy, was Boston Scientific’s president and CEO, Ray Elliott. Renowned as a turnaround artist who could resuscitate struggling organizations, Elliott had, to much fanfare, agreed in 2009 to come out of retirement and staunch the bleeding at Boston Scientific.
But now even he was bailing. “I heard from Ray about a week ago that he would like to now step down,” Nicholas said. “We reluctantly accepted his wishes.”