Penney board clashes over ceo search
August 9, 2013,
Plano, Texas - As JCPenney prepares to announce its second quarter results Aug. 20, activist investor Bill Ackman is publicly sparring with fellow Penney board members over the leadership of the embattled retail company. In the latest salvo, he reportedly fired off a letter to the board this morning asking that chairman Thomas Engibous be immediately replaced by one-time chairman and ceo Allen Questrom.
Ackman's initial letter to Penney's board urged the body to pick up the pace in finding a replacement for interim ceo Mike Ullman. Ullman, who served as chairman and ceo from 2005 to 2011, returned to the helm this past April upon the ouster of Ron Johnson - who had been recruited by Ackman to succeed him.
In response to Ackman, Penney's board yesterday released a statement in support of Ullman's stabilizing influence and the ceo search.
"When Mike returned, it was understood that there would be an effort to rebuild the management team, including a search process to identify his successor. The ceo search process, which began in earnest three weeks ago, will be careful and deliberate to ensure we find the right long-term leader for JCPenney. In the meantime, Mike and the leadership team will continue the work under way to improve the company's performance and get back on a path to profitable growth," Engibous wrote.
He added: "The board of directors strongly disagrees with Mr. Ackman and is extremely disappointed that his letter was released to the media at the same time that it was sent to the board. Mr. Ackman has been integrally involved in the board's activities since he joined two years ago. This includes leading a campaign to appoint the company's previous ceo, under whose leadership performance deteriorated precipitously. His latest actions are disruptive and counterproductive at an important stage in the company's recovery."
Penney's stock surged yesterday when word leaked that Questrom might rejoin the board in the lead seat. As chairman and ceo from 2001 to 2005, he successfully overhauled the then-moribund department store company.
Speaking on CNBC yesterday, he agreed the ceo search should conclude quickly - 30 to 40 days - saying there are probably no more than five executives in the country suited for the job. The right candidate should be one who is already a retail ceo, preferably a person with department store experience, he said.
Questrom also said he was "strongly in favor" of Ullman's return to the company as interim ceo, but added the board "should have had a candidate ready to go" when it fired Johnson last spring. "They certainly don't seem to have a sense of urgency," he told CNBC.
Questrom said he had been approached by a board member in April about becoming chairman. He listed three conditions under which he would do so: a board "that is not hostile;" the hiring of a ceo with whom he would be comfortable; and said ceo being comfortable with Questrom as chairman. "That's a lot of conditions," he said.
Asked by CNBC about his confidence in Penney's ability to pull off yet another turnaround, he bordered on fatalistic.
"Every day that goes by, it gets more difficult to see how this is possible. A lot of bad decisions have been made over the last several years." However, he said, "The company has such a great history. You wouldn't want to give up 'til it was dead."