JCP Board, Ackman in Fight Over CEO Search

JCPPLANO, Texas-The search for a J.C. Penney CEO successor to Myron “Mike” Ullman has turned into a battle of words—which could lead to the possible return of Allen Questrom.

Yesterday, activist investor Bill Ackman, whose investment firm, Pershing Square Capital Management, owns nearly 18 percent of the retailer’s outstanding shares, issued a letter to the J.C. Penney board urging it to speed up its search process. In the letter, he suggested that Questrom, J.C. Penney’s chairman from 2000 to 2004, has agreed to return as chairman “and assist in the turnaround as long as we hire a CEO that he supports.”

Ackman’s letter made its way to several press outlets, compelling J.C. Penney’s chairman, Thomas Engibous, to write a respond with his own letter, declaring the board’s “overwhelming” support for Ullman and expressing disappointment with Ackman’s action.

Saying he is “very concerned” about J.C. Penney’s future, Ackman in his letter stated that the board did not make the CEO succession part of its agenda until a meeting on July 22, nearly four months since Ullman returned to succeed the departed Ron Johnson as CEO. Ackman also said that as of yesterday, it has been two weeks since the board formed a search committee, “and we have just hired a search firm.”Ackman also said Questrom “believes that a thorough vetting of the limited potential available candidates can be accomplished in 30 to 45 stays.”

In an interview with CNBC yesterday, Questrom said he would agree to return as chairman “under the right conditions.” One of these conditions, he said, would be the hiring of a CEO “I was comfortable with, and that he or she would be comfortable with me.”

In his statement, Engibous said J.C. Penney has made “significant progress” since Ullman’s return. Ullman “has led significant actions to correct the errors of previous management and to return the company to sustainable, profitable growth.”

“Mike is the right person to rebuild (J.C. Penney) by stabilizing its operations, restoring confidence among our vendors and getting customers back in the stores,” Engibous said. “He has the overwhelming support of the board of directors, and we are confident the company is in good hands.”

Engibous also said Ullman returned as CEO, “it was understood that there would be an effort to rebuild the management team, including a search process to identify his successor.” He added that this search “will be careful and deliberate to ensure we find the right long-term leader” for J.C. Penney.

He concluded by saying that the board “strongly disagrees” with Ackman. Noting that Ackman has “been integrally involved with the board’s activities” since he joined it two years ago, Engibous added, “This includes leading a campaign to appoint the company’s previous CEO (Johnson), under whose leadership performance deteriorated precipitously. His latest actions are disruptive and counterproductive at an important stage in the company’s recovery.”