PLANO, Texas-The struggle within J.C. Penney’s board of directors continued with Bill Ackman releasing a second letter to the board calling for the replacement of Thomas Engibous as chairman by Allen Questrom.
The controversy is over the pace at which the board is searching for a CEO to succeed Myron “Mike” Ullman. In the second letter, released on Friday, Ackman, head of investment firm Pershing Square Capital Management, owner of the largest block of J.C. Penney’s outstanding shares, said, “I have lost confidence in our chairman’s ability to oversee this board.” He added that Questrom, the former chairman and CEO, would step in—as Questrom himself said in an interview with CNBC last Thursday—under “certain conditions.” One of these would be a commitment by the board to accelerate the CEO search process.
Ackman expressed concerns that normal processes of hiring and firing employees were not being followed, that decisions were being made without the board’s consent and that crucial information was not being shared with the board. He cited the recent hiring of former Kraft marketing executive Debra Berman as senior vice president of marketing (which, he said, was done without an opportunity for the board to interview Berman), and “aggressive” purchases of inventory and future commitments for later this year and into 2014, which J.C. Penney has made in spite of financial projections that show the company’s financial position as worsening, according to Ackman.
Following this letter, later on Friday, Engibous released a brief response in which he characterized Ackman’s statements as “misleading, inaccurate and counterproductive.” Engibous said the board “is following proper governance procedures, and members of the board have been fully informed and are making decisions as a group. This includes the CEO search process, which is being conducted at an appropriate pace. The board also continues to actively oversee management as it conducts the important work underway to rebuild the company.”