Correction: An earlier version of this story misstated who engaged Olshan Frome Wolosky to represent PulteGroup's largest shareholder: it is William J. Pulte, founder of Pulte Homes. It was incorrect to say that "the family" hired Olshan.
The plot thickens in PulteGroup's leadership struggle as the company declared that independent governance consultancy Institutional Shareholder Services recommends to shareholders that they back the current Board of Directors' slate of director nominees at the annual shareholders meeting on May 4, in Atlanta.
Meanwhile, Bill Pulte--company founder and leading shareholder William J. Pulte--has hired New York-based activist investor super lawyers Olshan Frome Wolosky, and its Activist & Equity Investment Group chairman Steve Wolosky--to explore options and recourse.
Not in the mix is a full-on proxy contest at the May 4th shareholders' meeting. A deadline for that type of battle has passed, leaving the Pulte family to have to seek other ways to achieve their stated goal of dismissing Richard Dugas as chairman and ceo, and, according to their assertions, "just doing the right thing by shareholders, Pulte employees, and customers."
As redoubtable a force as Wolosky and company may be, it seems that the current board of directors is rolling in artillery of its own, in what numerous industry executives have expressed as "the strangest train of events I've seen in all my years in home building," likening the dispute between the founder and his family and the Dugas-led PulteGroup as a "very public, very acrimonious divorce."
Each side rolls out a slew of financials and operational performance data points to support what one contends is a testament to a failed leadership and the other side demonstrates as a leadership that succeeded in navigating the enterprise through the nation's housing crisis and emerged a stronger, more resilient, higher performing company than it had been when it had a bigger balance sheet, more volume, and more heft compared with other public home builders. Here, for instance, is what the PulteGroup proxy says about executive compensation for the named-officer group at Pulte.
Value creation vs. value destruction. Most analysts who follow PulteGroup on behalf of institutional investor players say that an awaited dramatic payoff to financial, and operational disciplines the company has focused on for three-plus years is about to occur over the next 12 to 24 months. The last thing the company needs is distraction.
For myself, the revered and respected voice of founder Bill Pulte saying that his choice of Richard Dugas was the "worst mistake of my life" in 66 years of home building is wrenching. It's as if he wants everyone to think he made this one big blunder that now, after all these years, he's realized the consequence of his error, and wants now, somehow, to take a mulligan. Bill, what about all those Sarbanes-Oxley-mandated signatures you added to years of quarterly Pulte financial performance documents, that expressed your knowledge of, support for, and interest in the accuracy, the integrity, and the wisdom of Pulte strategy until your retirement in 2010?
You can't stand back now and not take your own responsibility for what Pulte was and is under Richard Dugas. And who would want to?
Pulte has been and is one of home building's exemplary organizations, easily one of the top three in the nation. It's flawed in ways that other publicly-traded home building companies are flawed; and it's terrific in many of the ways those companies, with that capital structure are strong, visionary, constantly improving, and ever-challenged by the moving targets of consumer demand, global finance, national policy, and local politics.
One of the sharp criticisms Bill Pulte has leveled at Richard Dugas, and blames him for, is that talent has left the building. Honestly, Bill, what company--even the ones that pride themselves as great cultures and great academies of talent--hasn't lost good people, particularly as recovery's choppy, sloppy, spotty recovery has created uneven opportunities and sudden ugencies?
Grandson Bill Pulte told me that his grandfather was particularly heartsick that longtime research and development wizard Jim Petersen was let go by Dugas, and wound up with Lennar, as VP Research and Development at Lennar Ventures.
For all of Jim's accomplishments in a career at Pulte characterized by innovation in both building science, construction process, and engineering for quality and efficiency, maybe it was in both his and Pulte's best interest that they part. In some circles, anyway, specifically as it regards focusing on innovation, self-disruption, and transformation, it's regarded as smart and necessary to "let go of what made your company great."
Among many of the home builders we have contact with, Pulte is regarded as one of the most progressive and illuminated when it comes to asking its current and potential home buyers, "how do you want to live," and testing, and pushing the envelope, and coming up with an evidence-based response.
Pulte's numbers as a financial performer have been worse in the past, and now they're better. They may be viewed as underperforming potential, but that's both subjective and a red herring, especially when it comes to serving what's best--in the long term--for shareholders.
We worry that, while the dispute may be of huge interest among a broad range of veterans and newbies in the industry, it will become not just a domestic squabble but a new, dark, venal statement about home builders, their investors, and their ability to stay on the rails with one another. Housing already has public relations challenges. It doesn't need a new example of fear, loathing and greed as the most compelling narrative during a critical Spring selling season.