The Wall Street Journal has an article today about Sears Holdings in advance of the company's annual meeting. The article notes that "the shares have nearly doubled in the past year, and the company has notched stronger sales in recent months," but the article is mostly devoted to criticism of Sears Holdings for having an "interim" ceo, Bruce Johnson, for 27 months under chairman Edward Lampert. Two points seem worth noting. From the article:
"In situations where there is a control shareholder, it is critical that companies have a strong CEO at the helm," said Olayinka Fadahunsi, a spokesman for New York State Comptroller Thomas P. DiNapoli, who manages the state's Common Retirement Fund. It owned 213,759 Sears shares as of March 31. "A two-plus-year search process is much longer than outside shareholders would like."
New York's budget in which Mr. DiNapoli has a role is in a historic mess, the state government over which Mr. DiNapoli has auditing authority is riddled with waste and corruption, and Mr. DiNapoli's own practices in investing the state pension fund are under scrutiny in connection with pay to play. Instead of focusing on running New York, Mr. DiNapoli is busy trying to tell Mr. Lampert how to run Sears? It's crazy, and a good reason why it'd be better to move state pension funds to accounts where the investment decisions are made by individual employee account holders, as in a 401K plan, as opposed to by a central government manager. (The other fund manager quoted in the story criticizing Sears Holdings is also a state government pension fund, Florida's. Both the New York and Florida funds overall have far, far lagged the long-term performance of Sears Holdings if you look at it starting at Kmart emerging from bankrupcy in 2003, so you'd think these fund managers would be worrying about the rest of their portfolios instead of focusing on Sears.) If Mr. DiNapoli doesn't like having an interim CEO, nothing is stopping him from voicing his position privately to the board chairman, or from selling his stock. If he feels so strongly about the matter, he could have sold a year ago and missed out on the doubling over the last year. It's this sort of thing that is going to make a lot of people think New Yorkers would be better off with Harry Wilson in the comptroller's office.
The second stunner is the description of Mr. Lampert as "a financier with no experience running a retailer." Mr. Lampert's been running Kmart since it emerged from bankruptcy in May 2003. It's since been merged into Sears Holdings. May 2003 was seven years ago. The guy has had seven years experience running a retailer. How many years before they stop describing him as "a financier with no experience running a retailer"? It's a classic example of how if something is repeated often enough people think it's true. Maybe in 2003 he was a financier with no experience running a retailer, but it's not accurate to just copy a description from the old stories into the new stories if the situation has changed.
Disclosures: I worked with one of the reporters on the Journal story when we both worked at the Los Angeles Times in the mid 1990s, and I liked him. I know and like some of the Sears guys, including Mr. Lampert, and they certainly don't need me to defend them. I haven't talked to them about this particular story. I don't own any Sears Holdings stock directly (alas!) though I may have a tiny bit through some index mutual funds.