Ethics of Penn Square Bank and the Dow Corning Bankruptcy

People Scientists

A Chemist Heats Up Dow Corning CEO Bums is driving income gains and a new focus on high-growth markets

I N 1967, WHEN CHEMIST SHAILER L. Bass retired as chief executive of Dow Coming Corp., Stephanie A. Bums was a seventii-grader in Ann Arbor, Mich., who spent her days dreaming about becoming a scien- tist. After school. Bums dissected

frogs and snakes and did chemistry ex- periments with her older brother. She stuck wdth it, getting a doctorate in or- ganic chemistry in 1982 and then a re- search job at Dow Coming, the privately held joint venture between Dow Chemical

98 I BusinessWeek I December 6, 2004

Co. and Coming Inc. She made her way firom the lab to the rarücs of management, and in January, 2004, was named CEO. For the first time since Bass, a chemist is heading Dow Corning once again.

The company needs Bums's scientific brainpower. Dow Coming is the world's biggest maker of süicones, a family of sü- icone-based compounds used in sealants, adhesives, cosmetics, and, most famously, breast implants. In June, the Midland (Mich.)-based company emerged fi-om nine years of Chapter 11 bankruptcy pro-

BURNS Her goal: tection—its refuge At least 20% from thousands of of revenue from lawsuits filed hy newpraducts women who believed ^ ^ ^ ^ " leaky implants made them sick. Dow Coming wül spend the next 15 years financing $3.3 bulion in set- tiement payments. Meanwhue, the indus- trial markets the company serves are nearly saturated. To rev up profits. Bums needs to pioneer new markets.

COOL UNDER FIRE BURNS, 49, IS DRAWING ON her ovra ex- perience in the lab to guide her company's rebirth. As a young scientist her specialties were inventing süicone compounds that could withstand high temperatures, as well as developing semiconductor materi- als for autos. Now she's nudging scientists to invent new compounds for other high- growth markets such as electronics, phar- maceuticais, and aerospace. Dow Com- ing's chairman, Gary A. Anderson—who handpicked. Bums to replace him as CEO—says her abüity to assess ideas right down to their chemical formulas "gives her a definite advantage in judging where we should devote our research efforts." Bums is also speeding up Dow Coming's expansion in China, India, and other mar- kets where süicone use is a firaction of what it is in the U.S.

The company is making progress. In the nine months that ended on Sept. 30, Bums's China initiatives helped drive net income up 23% over the same period in 2003, to $167.8 mulion, whüe revenues jumped 19%, to $2.5 biüion. Still, Bums concedes that she's nowhere near achiev- ing her ultimate goal: to derive at least 20% of annual sales from products that are less than five years old. "Innovation is a key priority for this company," she says.

Not that long ago, virtuaüy no one had much faith in Dow Coming's ñiture. Formed in 1943, the company hit on the idea of making breast implants with süi- cone in the 1960s. Originally designed for women who had mastectomies, the im- plant became a sensation as a cosmetic de- vice. But some women developed autoim- mune diseases such as lupus, which they attributed to the implants. Although the al- legations were never scientifically proven, Dow Coming pulled the product in 1992. A wave of injury lawsuits followed, forcing the company into bankruptcy.

The firestorm over implants put Burns on the path to the CEO suite. She had not helped develop the product, but in 1994, as the siege on the company intensified. Bums was named director of women's health. Personable and gregarious, she was

eople Scientists given the tough j ob of acting as liaison be- tween the Food & Dmg Administradon, plaindffs, and Dow Coming, relaying re- sults from independent research on the al- leged side effects of implants. She even appeai'ed on The Oprah Win- frey Show, bravely rebutdng pointed accusadons.

Anderson, who was then CEO, was so impressed with Burns's ability to explain complex data whOe staying cool under fire that he began promodng her, first to direc- tor of science and technolo- gy in Europe, and then to execudve vice-president. "She calmed the waters," Anderson re- calls. "That was the key to her ascent."

REVVED-UP RESEARCH BURNS, A MOTHER AND grandmother who is married to a Dow Corning chemist, spends much of her off-hours trying to get children excited about sci- ence—especially girls. She preaches to in- dustiy groups about the importance of science educadon in schools, and she set up a mentoring program that sends Dow Corning sciendsts to local classrooms. As one of the few women at the top of the chemical industry. Bums sees herself as a role model. "Science is no longer cool," she says. "That's really tragic."

Bums was always an enthusiasdc sci- ence student, enjoying both the discovery process and the camaraderie of most labs. As a graduate student at Iowa State Uni- versity, she often set off dry-ice bombs to

On deck: New fabrics, sldnpatches, and better solar panels

starde her classmates. "She was a heck of a lot of fun," says her former adviser, Thomas J. Barton, now director ofthe En- ergy Dept.'s laboratory in Ames, Iowa.

While some might shy away from the corporate-turnaround test she faces today. Burns sa- vors the challenge. Even be- fore she moved into the top job. Burns was steering the company into new territory. In 2003 she helped shep- herd Dow Coming's $115 million acquisidon of Ster- ling Semiconductor Inc., which makes silicon car- bide microchips that are

used to power devices in the aerospace and automodve markets. Dow Corning is also making more efficient silicon wafers for solar panels—a business that is grow- ing 30% a year. In the lab, meanwhue, re- searchers are mixing silicon with carbon- based compounds to try to develop newfangled fabrics, buuding materials, and pharmaceudcal products such as skin patches that emit drugs.

Burns's ex-lab partners understand the immensity of the challenge at hand. "She is giving us the responsibility to change the face ofthe corporadon," says Thomas H. Lane, a veteran Dow Corning sciendst. If s no small task. But with a chemist at the helm, Dow Coming's in- novadon makeover is well under way. •

-By Michael Arndt in Midland, Mich.

HIGH-PURITY SILICON WAFER

•I Stephanie A. Bums Many off-hours go to helping get children, especially girls, excited about science

BORN Jan. 24,1955, Torrington, Wyo.

EDUCATION BS, chemistry, Florida International University, 1977; PhD, organic chemistry Iowa State University, 1982.

CURRENT JOB President and CEO, Dow Corning Corp.

CAREER PATH Started at Dow Corning in 1983 as a

researcher. Promoted to director of women's health in 1994. Became

' director of science and

technology in Europe in 1997, then executive vice-president and director in 2000. Named president and chief operating officer in 2003. Promoted to CEO in January, 2004.

FAMILY Married to Gary a Dow Corning chemist. One daughter, two grandchildren.

HOBBIES Golfing and scuba diving.

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