Giving Them an Earful

Lenexa? Why there? Well, it's where Jim Oesterreicher, the Penney board, and senior management traveled in an attempt to dodge the press and hold a potentially volatile shareholders meeting with little notice or damage. This plan did not work, of course, and the company's management was again exposed as the foolishly incompetent husks they had largely become.

Shareholders saw the ruse for what it was, and enough showed up in Lenexa to cause trouble. When Duff-Bloom read newspaper accounts of the shareholders meeting, she could only shake her head in tired dismay. Here is the sort of thing that she read, representative of the handful of reporters who attended:

JCPenney Catches Heat from Investors
The retailer moved its annual meeting to Kansas,
but it couldn't hide from angry shareholders
St. Petersburg Times

Penney's Top Ranks Criticized
Shareholders blame CEO and directors
Dallas Morning News

J. C. Penney Shareholders Hammer CEO
Reuters

Officially, the shareholders meeting was moved to Lenexa in order to emphasize the company's excellent capability in catalog fulfillment. Lenexa was the location of a typically big Penney distribution center (like Don Seibert's original giant in Atlanta). Highly automated, the warehouses supplied stores and processed a stream of catalog orders ” and JCPenney Internet sales. Filling orders was a big hang-up for most of the new Internet retailers, and Penney, because of its multibillion-dollar catalog business, found itself fortunately positioned to move as fast as JCPenney dot-com could go. In COO Vanessa Castagna's reorganization, Internet sales were to be a priority effort.

Nevertheless, because the real reason for Lenexa was obvious to everyone, no attendee was in a mood to cut management any slack .

Past meetings had been embellished with fashion shows, videos , and other production values. Not this one. Held in a plain, open room at the warehouse, the meeting was as minimalist as possible. Folding chairs with a center aisle faced a small stage made of hotel-type risers with a curtain backing. On the stage were other chairs and a miked podium. The PA system and mikes on stands for the audience completed the staging.

In attendance were the board and senior management, with chairman Jim Oesterreicher conducting the meeting. Beforehand, reporters familiar with the Penney beat had agreed that with Oesterreicher's announcement of his pending retirement, it was time for him to finally communicate with some candor and clarity. All the same, just as in his opening remarks at the Adam's Mark meeting, he piled bromide upon clich and then made fanciful projections as ”never losing his dogged faith in "synergism" ”he argued for the stockholders ' confidence. But with his company in disorder , its stock down the tubes and little synergism actually in sight, the effect was the opposite . Only the stockholders' anger kept them from dozing off.

Finally, Oesterreicher went through the meeting formalities . In a sort of class action, a key piece of legislation was up for a vote. Proposed by Calpers, the giant pension fund, this would considerably increase director accountability. The proxy count was read, and the proposition was defeated, but only by a whisker ”to the vocal disappointment of the audience and the visible relief of the directors and officers. Little else raised similar interest until it was time for commentary from the floor.

Now angry shareholders came to the audience mikes. Ten people managed to speak. The criticism ranged from management failures to excessive compensation. Nobody was remotely complimentary , everyone highly exercised. But one speaker's moment was so dramatic and struck such a nerve that his remarks were summarized in virtually every newspaper account from Dallas to St. Petersburg to London.