What Was Wrong with the Penney Board?

The reader may have wondered about Penney's board during the Howell and Oesterreicher years . Why were they seemingly so quiescent? Supposedly representing the best interests of stockholders , why were they apparently blinded to the lack of a solid plan for the future la the company's historic reinvention cycle including a war chest? Why did they praise and reward the Howell administration for record sales and profits in 1994 when the numbers were often "bought" with heavy promotion at the expense of future inventory disarray and costly markdowns? And why did they reward Howell so well when he retired ? And, in so doing, why did they set up the biggest payout so that Howell received it after his bitter (and unsavory) divorce was finalized?

Dave Binzen ^[1] was a bright light in the New York merchandise department for some 30 years. He retired in 1981 to pursue several interests from a Vermont farm, having been known as a literate and highly skillful executive with an upbeat demeanor. But in 1998 Binzen wrote an uncharacteristically angry letter to Jim Oesterreicher.

Binzen cited egregious mistakes by the Penney brass and very poor oversight by the Penney board. It opened by calling the board "incompetent" and its actions " outrageous ." And what fueled Binzen's complaint? Simply that he had known a time when the Penney Company put ethics before business and thereby built a great business. He had also personally known two of the three great leaders in Penney historyMr. Penney himself and Mil Batten. And he found the cast of characters in the '80s and '90s badly wanting in comparison.

The Howell boards okayed the move to Dallas. For 86 years before this move, J. C. Penney had thrived. In another 12 it was nearly in the tank. Mil Batten had warned about disregarding the intangible benefits of headquartering in New York City. But that is a subtle and abstract concept and perhaps beyond a workaday board's grasp (as it was certainly beyond Howell's). On the other hand, wasn't it easily foreseen that the move to Texas might virtually destroy the company's wholesale buying expertise? Howell may have been oblivious to the importance of the buying function, but a board is supposed to add perspective and balance to a company's business. So where were they on this one?

^[1] Son of Bill Binzen, the early Penney vice president.