It all depends on which adage one wishes to use in describing the situation atop one of America’s best-known retail companies. J. C. Penney Company, Inc. (NYSE: JCP) could adopt the saying "the cream always rises to the top", or perhaps more fittingly, "the fish stinks at the head", in summing up the battle in the boardroom surrounding upper management at Penney and Pershing Square hedge fund manager Bill Ackman, who ultimately handed in his resignation this week.
Pershing Square is the company’s biggest investor, with a 17.7% stake in Penney.
Penney then told reporters it had appointed Ronald W. Tysoe, a former vice chairman of Federated Department Stores, to its board, and plans to name another director in the near future.
The public battle between Penney and Ackman escalated late last week with the hedge fund manager demanding the ouster of the retailer's chairman, Thomas Engibous, as well as interim CEO Myron Ullman.
At stake was Ackman’s dissatisfaction with a series of management changes Ullman had made, which, Ackman claimed, were outside the normal managerial processes. And he accused Engibous of freezing out some directors and running a dysfunctional board.
That board responded by essentially accusing Ackman of playing a role in the retailer’s continuing troubles, notably by bringing in Ron Johnson, the company’s last chief. Though widely hailed as the head of Apple Inc.’s retail arm, Johnson introduced a sweeping set of changes that alienated J.C. Penney’s core customers, including ending discounted sales.
Meantime, another major stakeholder, Soros Fund Management LLC, backed by billionaire financier George Soros, was holding onto its 7.9% stake in Penney, according to those in the know.
Much of this drama is but an appetizer to the truly meaty news that Penney will be releasing its second-quarter 2013 financial results this coming Tuesday, August 20.
Penney shares closed a volatile Thursday at $13.83 U.S., up 72 cents, or 5.5% from the day before. Even so, the stock remains stuck near the gully of a 52-week range that bottomed out late last week at $12.34 U.S. a share, a far cry from last September’s high point of $32.55 U.S.
