Office Depot Board Battle $ODP New Broom Sweeping or Elegant Fist Fight

Office Depot (NYSE:ODP) woke up this morning and found that its largest shareholder wants to re-constitute the board. Starboards Value LP  have proposed six of their own and want to do it now before the upcoming merger of equals with OfficeMax.

Activist shareholder Starboard Value LP is saying the existing board cannot handle the new venture. Office Depot and OfficeMax are clearly also rans in the battles with Staples. So the merger is not a brilliant flanking move but a consolidation and lets hope it works stratagem.

The new board of directors is not the championship team that knows the way to the Super Bowl. Lets take a look at a few of the longer serving members on ODP’s board:

W Scott Hedrick 66 is the lead director and has been long serving. Very long serving. Which means he has not provided any differentiating leadership that would have allowed ODP to beat Staples. The corporate blurb says “he brings important institutional knowledge and he has a solid basis for his analysis of our financial strategies” Sounds like he is an excellent analyst.

Brenda J Gaines 62 was formerly President and CEO of Diners Club and previously a rising star in Citigroup. So some more financial experience and insight into plastic money and payments. Not a critical skill for a commodity supplier of office supplies.

Marsha Johnson Evans 64 is a retired Rear Admiral USN and a human resources type. If you look at the sales associates in Office Depot they did not use the high pieces of her advice.

Nigel Travis whose resume lists Dunkin Donuts, Papa John’s, Blockbuster and Burger King is clearly a fast food guy. Not sure how many transferable skills and experiences applied to office supplies.

Justin Bateman 38, sits on the board by virtue of an investors rights agreement with BC partners who has a substantial investment stake in ODP. He should have the best ear for take over value.

Starboard’s CEO Jeffrey Smith wrote in a letter to Office Depot. “Instead, now
is the time to act to immediately improve the current operating performance of
the business on a stand-alone basis and to be in position to maximize the longer
term synergies with OfficeMax if the merger is approved.”

Among the board nominees are Smith and two executives Starboard had already said
it was working with: Robert Nardelli, former CEO of Home Depot and Chrysler, and
Joseph Vassalluzzo, a long-term Staples executive. Also nominates are James
Fogarty, CEO or Orchard Brands, Cynthia Jamison, a board member at Tractor Supply Co.
and David Siegel, CEO of Frontier Airlines.

Quite frankly the new replacement players sound way better than the old team.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti or maybe follow his evil twin who is writing a Wall Street Murder Thriller at twitter@georgegutowski


Office Depot Governance Failures

An Office Depot store in Fremont, California.

Image via Wikipedia

Office Depot (ODP) recently bid a tearful good-bye to its delinquent Chairman and CEO Steve Odland. The good-bye was so tearful that despite wrong doings relating to Reg FD and misleading investors the golden parachute was allowed to deploy. Steve Odland has been allowed to make millions of dollars while leaving behind a regulatory disaster.

Lets look at the board of directors and their backgrounds. They are ultimately to blame. The data presented below is from Office Depots investor relations section of their website. This is Office Depot’s Wall of Shame:

Lee Ault III: Chair of mutual funds managed by Capital Research & Management

Neil Austrian: Used to be President and COO of the NFL

Justin Bateman: Partner BC Partners New York office. He claims a due diligence background from Pricewaterscooper

David Berman: Retired chairman of Walgreens

David Fuente: Retired chair of Office Depot

Brenda Gaines: Retired President & COO of Diners Club

Myra Hart: Member of Harvard B School senior faculty

W Scott Hedrick: Former head of Staples. co-exists with Lee Ault III at American Funds Target Date Retirement Services

Marsha Evans: Former Rear Admiral United States Navy. On the boards of Lehman and Weight Watchers

Kathleen Mason: President and CEO of something called the Tuesday Morning Club

James Rubin: BC Partners

Raymond Svider: BC Partners

Thomas Colligan: Vice Dean Wharton School Aresty Institute of Executive Education 

This failure is attributable to the above.

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post.

Office Depot Disclosure Challenged?

Office Depot at 4001 Durham-Chapel Hill Boulev...
Image via Wikipedia

Office Depot (ODP) fired the chairman of their board and CEO, Steve Odland. It was the only plausible action available after the Securities and Exchange Commission found him personally guilty of breaking Reg FD. Watch for the shareholder rights lawsuits to come.

The press release sounded like a tearful farewell. you know the board did not have their heart in it. Therefore what compliance culture will they have in the future? To distract investors from executive malfeasance or what could be described as very bad judgement in the executive suite, the board signalled earnings and just came out and said we will beat expectations. Desperate tactic so that the stock does not drop. Actually they got a nice initial bounce north of $5.00 and then watched the stock slide off.

It is about the culture. Steve Odland was the head man for a long time. You have to believe his value system permeated the executive suite. Has all the cancer truly been removed? The competition is just licking its chops savouring an extra big lunch soon. Private Equity Capital is considering a take over because management is not that smart and needs a shake up.

Heidrick and Struggles is doing the executive search for a permanent replacement. If they call you do you really want to go to lunch?

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post.

Office Depot Guilty?

Office Depot’s corporate headquarters in Boca ...

Image via Wikipedia

Office Depot (ODP) settled SEC charges regarding Reg FD violations. Stephen Odland and Patricia McKay will each pay $50,000 personally. However because of their incompetence (nicest thing we can say) in violating clear Reg FD policies Office Depot will have to pay out a $1 million fine. Why do the shareholders have to pay the fine for the inappropriate actions of the two executives. I would like to see the Board hold them accountable. After all they were the CEO and CFO not just junior staffers.

Can you imagine working for a boss who has violated  securities law and then watch them sign off on compliance sensitive issues. Will investors trust these two again. Stephen Odland is still the CEO and Chairman of the Board.

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no position in stocks mentioned in this post.