As J.C. Penney looks for yet another new CEO, its board members have become embroiled in a rare and embarrassing public feud over how quickly the current one should be replaced.
On Aug. 8, board member and prominent Penney’s shareholder Wiliam Ackman released a letter suggesting that Michael Ullman, who took over from former Apple retail executive Ron Johnson in April, should be replaced within the next few months. That would mean the company would have had three CEOs in less than a year.
“I am very concerned about the future of J.C. Penney,” said Ackman’s letter, which CNBC obtained and published. “While I supported the decision to bring back Mike as an interim CEO, it was based on [the board chairman’s idea] that we would immediately launch a search process for a long-term CEO.”
The letter also says that former chairman Allen Questrom, 69, has agreed to return as chairman “as long as we hire a CEO that he supports.”
Ackman’s note was rebuked by a press release issued the same day by current chairman Thomas Engibous, on “behalf of the board of directors.”
Penney’s “has made significant progress since Ullman returned as CEO four months ago, under unusually difficult circumstances,” the release said.
The letter also contains unusual criticism of Johnson, who was backed by Ackman, noting that Ullman “has led significant actions to correct the errors of previous management.”
Engibous added that Ullman has the “overwhelming support” of the board, though he did confirm that a search to replace Ullman was on.
“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 letter continued. “The CEO search process, which began in earnest three weeks ago, will be careful and deliberate.”
The letter concluded with a slap at Ackman for supporting Johnson, “under whose leadership performance deteriorated precipitously,” and for releasing his note to the media.
Ackman’s “latest actions are disruptive and counterproductive at an important stage in the company’s recovery,” the letter said.
Following this, on Aug. 9, Ackman fired another salvo, releasing a statement on PRNewswire advocting Engibous’ ouster and again recommending that Questrom head the board.
Ackman admitted that releasing the first letter to the media was “an extraordinary step,” but said that the Penney’s board “has ceased to function effectively,” and complained that he wasn’t being appraised properly of finances and hiring and firing decisions.
“While the board agreed that it would take the ‘interim’ out of Mike’s title to assist him with working with the team in [Texas at J.C. Penney headquarters in] Plano, Mike was hired by this board as an interim CEO,” the note said. “He has not acted like one. When Mike was asked about succession at the last board meeting, he said that he did not know of any other executive who could run the company.”
Ackman also expressed concerns that J.C. Penney was ordering too much in inventory, noting that a vendor had called him to say the company was giving out too many purchase orders.
“When a vendor expresses concern that J.C. Penney is buying too much, we need to take a very hard look at the commitments we are making,” Ackman said. “In my opinion, Mike is overly optimistic about the near-term future of J.C. Penney.”
The letter concluded: “Time is of the essence. Hopefully, this is the last board letter I need to release to the press.”