Former UCSD Chancellor : Educator Braves Corporate Management ‘Buzz Saw’

William McElroy may have have had his sights set on the easy life after his retirement from a stormy but fruitful eight-year term as UC San Diego chancellor in 1980.

But it didn’t turn out that way.

As a director of three San Diego-based public companies, McElroy has helped steer firms that created as much controversy as the administrative reorganizations he rammed by a disgruntled UCSD faculty before his forced retirement.

McElroy, 67, serves as a director at San Diego Gas & Electric and Sun Savings & Loan Assn., and was, until last summer, a board member of Kratos Inc.

All three companies over the years have been hip-deep in financial troubles, management shake-ups and image problems.

Dealing with the firms’ woes has been a little like stepping “into a buzz saw,” McElroy said.

Nonetheless, while others often avoided the spotlight during stormy times, McElroy has steadfastedly maintained a public persona, typically offering insight into management’s decisions.

“When the press calls, I can’t just clam up,” he said. “I try to be careful and not involve other people, but if you’re honest and it’s public information, then you can’t be faulted.”

McElroy’s most-public brouhaha occurred last summer, when a bitterly divided Sun Savings board openly warred in an attempt to oust then-chairman and chief executive Daniel W. Dierdorff.

McElroy was vacationing with his wife in Italy when he received a hurried phone call from Sun directors informing him that a special board meeting was being held right then and he was needed, via telephone, to make a quorum.

The call, placed at 12:30 a.m., Italy time, awoke the couple, McElroy said in a court affidavit. He said that if he had not been half-asleep, he would have objected to the meeting.

However, according to a sworn declaration by Sun director Alan Koljonen, McElroy was on the telephone for more than 30 minutes and had told the board that he and his wife were sharing a bottle of wine at the time.

Dierdorff eventually stepped down after a bitter legal battle and after a $10-million takeover bid from New York financier Van D. Greenfield. The Greenfield bid was called off late last month.

But the airing of the board’s feuds left a negative public impression and caused a rift among some board members.

When McElroy returned from his Italian vacation, he scolded the board for the way it handled Dierdorff’s firing.

“They should have called Dan in privately and told him they wanted a new person for the job,” said McElroy, who is serving as acting chairman at Sun.

It is bitterly ironic that an out-of-towner will take over Sun, because the University City-based thrift was founded in 1980 to lure La Jolla money to a local savings institution.

At Kratos, McElroy was asked to become a director of the high-technology, precision instruments producer because of his scientific expertise. It was a logical fit when the company was expanding and increasing its revenues.

But trouble began when Kratos bought New Jersey-based Keuffel & Esser Inc. (K&E;) during the recession in 1982 in an attempt to triple its sales. Paying back the $75 million it borrowed for the purchase proved too weighty a challenge, and the company soon went into a downward spiral.

In 1984, Kratos went through three presidents and two chairmen, generated a flood of red ink, was in violation of its bank-mandated debt-to-equity requirements, reported a negative net worth, had its stock pulled from the trading markets and sold off its three profitable operations.

The company is left with only Keuffel & Esser and plans to relocate corporate headquarters to the subsidiary’s New Jersey facility next month.

Kratos’ escalating fiscal troubles were matched with a decrease in McElroy’s board participation, so he resigned last summer.

“From a technical standpoint, I was no longer contributing anything,” he recalled. “And I won’t go on a board if I can’t make a contribution.”

He said he would have resigned as a Kratos director earlier but was afraid it would appear as if he were abandoning a company in need.

Such appearances are important, McElroy said, because they affect the public’s perception of a company and, therefore, that firm’s stock price.

Board members also are affected by the public perception, as witness SDG&E; directors who steered the utility through a series of management blunders, energy rate hikes, growing consumer unrest and an orderly executive reorganization.

“I knew what I was getting into,” McElroy conceded of his decision to join the utility’s board in 1979.

“There were management problems, but there was also an oil embargo and making long-range agreements to stabilize rates. Each deal on the surface looked good and, (when it turns sour), later you can just say it’s bad judgment.”

In business, one bad judgment call can ruin a career. No-harm, no-foul may work in basketball, but it’s an inoperative concept in high finance.

Nonetheless, SDG&E;’s board stayed intact, in part, because management kept directors informed, McElroy said.

“It’s a good give and take,” he says of the board’s relationship with Tom Page, SDG&E; chairman, president and chief executive officer.

Ironically, it was a management decision that spelled the end of McElroy’s tenure as UCSD chancellor. He took away responsibility for the university’s $120 million-a-year (and growing) research and graduate study budget from the vice chancellor of academic affairs and created a position to oversee research funding.

Today, McElroy--raised in Texas with degrees from Stanford, Reed College and Princeton--says he is “not considering” any more offers to sit on boards of directors.

He will remain a director of SDG&E;, as well as a board member of Wright Energy, a Santa Monica-based private oil reserve exploration company, and of Analytical Luminescence Laboratory, a Sorrento Valley-based firm that markets the chemical emission of light process to analyze medical tests.

Other directors on that board include McElroy’s wife, Marlene Anderegg (also a noted biochemist), contractor Robert Golden, and businessmen Robert O. Peterson and Richard T. Silberman.

Peterson and Silberman aren’t strangers to McElroy: He was a director of their Southern California First National Bank, the predecessor to California First Bank.

But hobnobbing isn’t as important as it once was to McElroy. “I better start worrying about my own money,” he said when asked what he’ll do when he reaches 70 years, the UC system’s mandatory retirement age.

“I won’t go hungry, but I’m not rich. But at my age it’s time to relax and have some fun.”

Perhaps feeling a tinge of guilt over the thought of retirement, he adds, without missing a beat, “but being in the middle (of things) keeps you young and alert.”