Morrison Knudsen Chief Agee Forced to Step Down : Management: Experts say construction firm’s finances were in disarray and its employees were demoralized.

William Agee, whose imperious style and flawed strategy at the helm of Morrison Knudsen Corp. shattered the company’s finances and demoralized employees, has quit under pressure.

Agee, 57, submitted his resignation as chairman and chief executive to the other 10 company directors at a meeting in San Francisco late Thursday, acknowledging that his departure would be best for Morrison Knudsen. He had previously agreed to give up his post as CEO but had been lobbying to remain as chairman until 1998.

Management experts were scathing in their assessment of Agee, denouncing him for arrogance and self-indulgence--first displayed during his rocky tenure at Bendix Corp. in the early 1980s. His reign at Morrison was likened to that of RJR Nabisco’s Ross Johnson, whose excesses led to a dramatic downfall.

“The guy’s behavior was a . . . scandal,” said Jon P. Goodman, director of the Entrepreneur Program at USC.

Known for its roles in building the Hoover Dam and the Alaska Pipeline, Morrison Knudsen on Friday named interim managers: the acting chairman is director William P. Clark, 63, who was secretary of the Interior and national security adviser under President Ronald Reagan and was a justice of the California Supreme Court from 1973 to 1981; Stephen G. Hanks, 44, the company’s executive vice president for administration and finance, was named acting CEO.

Agee’s abrupt departure followed disclosures last week that Morrison Knudsen’s finances have deteriorated badly. The company expects soon to report deep losses for 1994, largely as a result of Agee’s ill-fated foray into rail-car manufacturing.

Morrison Knudsen, based in Agee’s hometown of Boise, Ida., also said it has defaulted on bank loans, plans big write-downs on construction and transit projects and might have to sell assets to raise cash. Several shareholder suits have been filed.

“We want to re-establish our good name in the construction and engineering field and . . . re-establish our good financial standing,” Hanks, a 16-year veteran of the company, told reporters after a board meeting in San Francisco on Friday. Hanks noted that he and Robert A. Tinstman, whom the board installed as acting chief operating officer, together have years of experience at the company.

Clark will head up the search for a permanent replacement for Agee, but Hanks said he and Tinstman have been given six months to prove themselves.

“To use sort of a worn-out phrase, we want to underestimate and over-perform,” Hanks said. Agee, by contrast, earned a reputation for blowing the company’s--and his own--horn but coming up far short when it came to results.

Morrison Knudsen insiders, many of whom resented Agee and his absentee management style, gave high marks to Tinstman but expressed concern that Hanks had been too close to Agee.

Morrison Knudsen shares rose 62.5 cents to $10.25 Friday on the New York Stock Exchange.

Since Agee took the helm at Morrison Knudsen in 1988, his style has caused resentment among many longtime employees. He spent lavishly on frequent trips between Boise and his home on the Pebble Beach Golf Links in California and dismissed several veteran managers who disagreed with him. In recent years, he had taken to running the company primarily from an office in Carmel.

Agee burst into the public consciousness as a brash young Harvard MBA heading Bendix Corp., which in the early 1980s launched a hostile bid for Martin Marietta. The move backfired. While at Bendix, Agee was romantically linked with a protege, Mary Cunningham. The two later divorced their spouses and were married.

Nell Minow, co-principal of the LENS Fund, a money management firm and supporter of activist corporate boards, took Morrison Knudsen’s board to task for failing to keep shareholders’ interests paramount.

“It’s an example of a board who forgot who the boss was,” Minow said. “I think they should be humiliated at the very minimum.”

Agee’s departure was met with relief in Boise. Said Velma Morrison, widow of company co-founder Harry Morrison: “All I can say is good riddance.”

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Associated Press contributed to this story.