Ackman Steps Up Fight at Penney’s Board and Calls for New Chairman

The hedge fund manager William A. Ackman stepped up his fight against fellow directors of J.C. Penney on Friday, publicly calling for the replacement of the struggling retailer’s chairman and reiterating a demand for a new chief executive.

In a letter to the board, Mr. Ackman laid out a litany of complaints about the conduct of both the company’s chairman, Thomas Engibous, and its interim chief executive, Myron Ullman. The missive came after a letter to the board sent on Thursday requesting that a new chief executive be selected in the next 30 to 45 days.

Mr. Ackman’s unusual airing of Penney’s internal workings suggests yet another round of turmoil for the company, which has struggled amid leadership changes and disastrous business strategies.

In addition to being a board member, Mr. Ackman is Penney’s biggest investor. His hedge fund, Pershing Square Capital Management, owns nearly 18 percent of the company’s shares.

In Friday’s letter, Mr. Ackman called on Mr. Engibous to be succeeded by Allen Questrom, a former Penney chief executive and longtime retailing executive. Mr. Questrom told CNBC on Thursday that he would do so only if he were comfortable with the board’s choice of new chief executive and would not come as part of a hostile bid.

Mr. Ackman also complained bitterly about Mr. Ullman, another former Penney chief who was brought back this spring to stabilize the company after the disastrous tenure of Ron Johnson, the former head of Apple‘s retail operations. Though the return was described as temporary, Mr. Ackman contended that the interim leader has begun to act more like a permanent one, making a number of firings and hirings outside the normal managerial processes.

Mr. Ullman, who goes by Mike, also told analysts that he was the Penney board’s long-term choice for chief executive, according to Mr. Ackman’s letter. Describing what he sees as Mr. Ullman’s improper new attitude, Mr. Ackman wrote, “When Mike was asked about succession during the last board meeting, he said that he did not know of any other executive who could run the company.”

Mr. Ackman also complained about recent behavior by Mr. Engibous, including reportedly cutting off discussions about the search process for a new chief. He also implied that the chairman was too close to Mr. Ullman, noting that the two men once split the use of a Gulfstream V private jet.

“I am concerned that personal relationships and potentially other business dealings outside of J.C. Penney are clouding certain board members’ judgment,” Mr. Ackman wrote.

Late on Thursday, Mr. Engibous responded to the first of Mr. Ackman’s publicly disclosed letters, noting in a statement that the board had formed a search committee three weeks ago to find Mr. Ullman’s successor. He also took a swipe at his fellow board member, noting that Mr. Johnson had been hired at the behest of Mr. Ackman.

“The board of directors strongly disagrees with Mr. Ackman and is extremely disappointed that his letter was released to the media at the same time that it was sent to the board,” Mr. Engibous said. “His latest actions are disruptive and counterproductive at an important stage in the company’s recovery.”

Bill Ackman's Second Letter to J.C. Penney Board