Senior adviser Pedro Reinhard, who retired as the chemical giant's chief financial officer in October 2005, and Romeo Kreinberg, a divisional executive vice president, were dismissed with the approval of the board of directors, Andrew Liveris, Dow Chemical chairman and CEO, said Thursday.
Reinhard remains a member of the board because only shareholders, not management, can remove directors.
"The values of integrity and respect for people are at the very core of our company," Liveris said in a written statement.
"I think I speak for all employees when I say we are greatly saddened by the disrespect shown by our former colleagues. But we will move on to shape our future with an even greater resolve to execute our strategy and deliver value to our shareholders."
The statement said Reinhard and Kreinberg had "engaged in business activity that was highly inappropriate and a clear violation of Dow's Code of Business Conduct."
Chris Huntley, a spokesman for Midland, Mich.-based Dow Chemical, said the two men were "involved in discussions with other parties about acquiring the company. This wasn't them talking on behalf of the company. We had no knowledge that these discussions were going on."
On Monday, Dow Chemical issued a statement saying it "has had no discussion about a leveraged buyout" and that the board "fully supports Dow's management team."
"These two individuals, we subsequently found out, were having conversations about such activity," Huntley said.
Contacted at his home by telephone on Thursday, Kreinberg said there is no truth to the accusations against him and that he has sought legal counsel.
"The behavior of the company is very unusual, and the accusations have absolutely no substance and are highly damaging to my reputation after 30 years of employment," he said.
A man answering the phone at Reinhard's home asked a reporter to call back later. There was no answer to subsequent calls made to the home.
"At the very least, we believe the firings confirm that there was some takeover interest - either by a private-equity firm or by a strategic buyer," Citigroup analyst P.J. Juvekar wrote in a note to investors.
Jukevar said the firings were "swift and decisive, particularly in the context of Dow's conservative operating culture," while Frank Mitsch, an analyst at BB&T Capital Markets, called it "very shocking news." "It's very surprising to say the least," Mitsch said. "Pedro has obviously been one of the most impressive figures at Dow for a number of years." Reinhard owns 445,666 shares of Dow Chemical, according to LionShares.com, a Web site that tracks a company's largest shareholders. Based on the stock's closing price Thursday, those shares are worth $20.5 million. He also holds options on another 209,166 shares. Kreinberg owns 165,975 shares worth $7.6 million and holds options on another 355,884 shares. Shares of Dow Chemical jumped Monday after a British tabloid reported that a group of Middle Eastern investors and U.S. buyout firms was preparing a bid for the company, which makes and sells chemicals, plastics and farm products to customers in a range of industries. Dow Chemical reported that it earned $3.72 billion last year on sales of $49.1 billion. The Sunday Express reported over the weekend that the group - including private equity firm Kohlberg Kravis Roberts & Co. - had secured financing for a $50 billion bid for the Midland-based company. Kohlberg Kravis Roberts has declined to comment on the report. The newspaper first reported in January that several private equity firms were interested in Dow Chemical. In a proxy statement filed last month, Dow Chemical said shareholders will vote on four proposals at the company's annual stockholder meeting scheduled for May 10. One is a board-supported proposal to drop a company requirement that an 80 percent "supermajority" of shareholders approve mergers, buyouts, removals of directors and other major moves, and require only a simple majority. Huntley said the timing of the proposal is coincidental because the proxy statement was prepared well in advance of its release. Dow Chemical's shares rose 91 cents on Thursday, or 2 percent, to close at $46 on the New York Stock Exchange. Shares have traded in a 52-week range of $33 to $47.60.