America’s Worst Board Members: Thomas J. Engibous Of J.C. Penney

J.C. Penny (NYSE: JCP) shares rose sharply on Tuesday after the troubled retailer announced that the chief of Apple’s retail operations (NASDAQ: AAPL), Ron Johnson, would be its new CEO. The stock moved higher from $30.25 on Monday to almost $36 on the day of the disclosure.

Wall St. had second thoughts almost immediately. Morgan Stanley’s retail expert Michelle Clark wrote that the new CEO would not solve the core problems that have driven J.C. Penney’s shares down 50% over the last five year Meanwhile, peer Nordstrom’s stock is up 20% over that period and the DJIA is up about 10%.

Several observers also noted that current CEO Myron E. (Mike) Ullman, III, who has been at the helm of J.C.Penny through its entire collapse, would stay on as executive chairman. The Wall Street Journal made the observation that Ullman would continue to operate the J.C. Penny stores.

The decision to keep a CEO with a poor record as part of the management team falls to the board of directors and more specifically Thomas J. Engibous, lead director. Engibous was quoted as saying “The progress made under Mike’s leadership is reflected in the Company’s ability to attract an executive of Ron Johnson’s talent and track record as it continues to focus on achieving its objective of becoming America’s most exciting place to shop.” The fact of the matter is that no progress was made under Ullmann.

Penney’s sales in the 2007 fiscal year were $19.9 billion. Net income was $1.15 billion. In the most recent fiscal  year, revenue was $17.8 billion. Net income fell to $393 million. The board paid Ullman a shameful $13.1 million in 2010, a year when it seems it was more appropriate to fire him

Engibous has been a director since 1999, so he was on board when Ullman was hired in 2004. The J.C. Penney directors had an opportunity to make a clear break and bring in a talented executive to be CEO. Instead, Ullman is still at the retailer and no one knows for certain whether he or Johnson run J.C. Penney. Shareholders have a right to be alarmed

Douglas A. McIntyre