Good afternoon,
If you believed President-Elect Joe Biden was not paying attention to the travails at DuPont Co., think again.
The Wall Street Journal (subscription) has a must-read piece for business people in Delaware that strongly suggests Biden’s views on corporate America and the economy have been influenced by Nelson Peltz’s effort to reshape the company.
Biden was not happy with the boardroom battle outcome that led to a temporary victory for DuPont CEO Ellen Kullman over Peltz. Shown above is the now iconic eyeball to eyeball photo from DuPont’s shareholder meeting.
Peltz is a master at buying a small chunk of stock in targeted companies and then forcing changes that cut costs and payrolls. More than once, he targeted companies with female CEOs, another example being Pepsi. He lost that battle. Naturally enough, Peltz denies any bias.
Kullman’s defenders say the DuPont board put her in a no-win situation with an array of mature businesses that made “Uncle Duppie” vulnerable to buccaneers like Peltz.
Later, when DuPont results came in below Wall Street estimates, Kullman stepped down, and board member Ed Breen took over as CEO.
In a series of slice and dice deals, Breen and the now-retired CEO of Dow did some mind-bogglingly complex financial engineering and came up with DowDuPont, which was then split off into three companies – a slimmed-down Dow; the combined Dow and DuPont agriculture businesses (Corteva); and DuPont.
Biden’s thinking is that the merger and spin-offs reflect the quarter-to-quarter obsession of corporate America.
As for DuPont’s various businesses, most seem to be churning out more cash with the company no longer having the distractions of running a hotel and country club.
The University of Delaware’s Charles Elson, a nationally known expert on corporate governance, says shareholders should always come first. Otherwise, CEOs have no accountability.
Biden and a growing number of CEOs feel otherwise and suggest the community and employees deserve a place at the table.
Breen’s ultimate goal of unlocking shareholder value (in simple English, a higher stock price) remains elusive.
As the Journal noted, the stock market value of DuPont and Corteva is pretty much the same as it was pre-merger, and Breen had to return as CEO at DuPont as the earnings disappointments continued.
All of this would seem to reinforce Biden’s argument about the futility of focusing solely on quarterly results. Others say it will take some time before the benefits of the slicing and dicing are fully realized. To his credit, Breen has made needed investments at the Experimental Station and production sites.
How DuPont’s tale will influence economic policy remains to be seen. Early signs seem to point to Biden getting counsel from CEOs who share some of his views.
Enjoy your evening. We’ll be back tomorrow with the final newsletter of the week. That will allow us to catch up from yet another period of Covid-heavy news. – Doug and Sharon Rainey
