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Bill George

Harvard Business School Professor, former Medtronic CEO

The News Journal: DuPont CEO Ellen Kullman called a ‘hero’

By Maureen Milford, The News Journal, May 14, 2015:

To du Pont family member Tatiana Copeland, the DuPont Co.’s chief executive, Ellen Kullman, emerged Wednesday as “the hero of America.”

“She’s the female John Wayne,” Copeland said of Kullman after the company’s annual meeting, where DuPont beat back activist investor Nelson Peltz and his Trian Fund Management in its bid to get four seats on the company’s board.

“She didn’t flinch.”

Copeland is not alone in her opinion. Following DuPont’s victory Wednesday, some investors, academics and businesspeople said the struggle went far beyond DuPont. Now, Kullman and the board have set a standard for companies facing future proxy wars, they said.

“Everyone was watching it. This was a seminal test,” said Bill George, former chief executive of Medtronic and a director of Exxon Mobil and Goldman Sachs. “It’s a much bigger battle between advocates of short-term returns and believers in the long-term value creation for employees, customers, community and shareholders.”

The way George sees it, the DuPont win over Trian was an example of a corporate CEO and board not being intimidated when an activist investor tried to push its way into board seats. Now, a “playbook” has been created for other corporate leaders to follow, he said.

“I think people will think twice before anyone runs a proxy contest against a capable CEO doing the right things with a clear strategy and a strong board,” he said.

Jeffrey Sonnenfeld, senior associate dean for leadership studies at Yale School of Management, said Kullman showed other corporate leaders how to “take on an activist.”

“She never stooped to the mud-throwing. There were no personal invectives. She took the high road and said, ‘Here’s the truth. Here’s the facts,’ ” Sonnenfeld said.

To Sonnenfeld, the DuPont victory has done three things in corporate America: It will fortify the courage of corporate leaders who have strong performance records; it will embolden boards and CEOs to hold their ground and not capitulate when unfairly under attack by activist investors; and it will discourage activist investors and proxy rating firms from “using reckless bravado.”

“Activists still have a role to play. They should focus on the facts and not ad hominem attacks,” he said.

Lawrence Hamermesh, professor of corporate and business law at Widener Delaware Law School, said it’s possible to overestimate the impact of the DuPont proxy contest as a model for corporate America. Peltz is a serious investor who has made a large investment and is not a quick in-and-out activist, Hamermesh said.

“DuPont’s win depended on the fact that [Kullman] and her team have already done a lot of things to show they’re responsive to investor concerns,” Hamermesh said. “You don’t get CalPERS [California Public Employees Retirement System] to support you by ignoring investor interests.”

George said he believes this battle was about more than money to Kullman.

“She’s not doing this for herself,” George said. “She bleeds DuPont red.”

Brien Jamison, Kullman’s brother, agreed. He said his sister put her “heart and soul” into the battle.

“I think it drained her emotionally,” Jamison said.

Former DuPont Chief Executive Edgar S. Woolard Jr., the former Apple Computer Inc. board chairman credited with helping to bring Steve Jobs back to that company, called the proxy victory “a great job done by the DuPont team.”

“I always knew they would win,” he said.

Copeland, whose father-in-law was the last du Pont family member to head the company and once was the largest single stockholder, said shareholders issued a clear vote of confidence for Kullman and should help her move forward with the company’s initiatives. Copeland said she and her husband, Gerret, continue to own “a lot” of DuPont stock but declined to say the amount.

Many experts believe individual investors like the Copelands helped push Kullman and DuPont to victory. Following the announcement detailing the results of the voting, the roughly 400 shareholders in attendance at DuPont’s new corporate headquarters at Chestnut Run stood and applauded long and loud.

“That’s when I saw Ellen crack a little smile,” Copeland said.

In a press conference following the annual meeting, Kullman behaved as if it was just another working day and appeared to take the win against Peltz in stride. She emphasized that employees “during this period have been phenomenal, focusing on the business, focusing on our customers, on innovation, continuing to make progress out in the marketplace.”

“I’m very proud of my board. They are a board that continues to raise the bar. They are a board that continues to engage with management and yet this took it to another level in terms of telling our story with shareholders, as well,” she said.

She acknowledged that individual – or so-called retail – investors “normally don’t vote as often as they should.” Retail investors represent about a third of the company, she said.

“But apparently we got their attention this time, and they were very active in that. I think that’s unusual for a company to have a large retail section so I do think they were helpful because normally they’re supportive of management,” she said.

Kullman’s first cousin, Sharon Baker, whose mother owns DuPont stock and whose late father worked for the company, said she emailed Kullman Wednesday morning with a “Go get ’em.”

To Baker, the vote is “a huge victory and for all the right reasons.”

“It’s wonderful to know that bullies don’t always get their way,” Baker said.

Kullman, 59, grew up in suburban Wilmington and attended the private Tower Hill School. Members of her large, extended family had business dealings with DuPont since the 19th century.

Jim Horty, vice president of Commonwealth Trust Co., whose family has been friends with Kullman’s family for generations, said the DuPont win “is good for Delaware, good for the employees, good for the retirees, good for the stockholders and good for the community.”

“I think there are a lot of CEOs that think it’s about time someone took these activist investors on – and she took ’em on big time,” Horty said.

Shareholder Nelson Fernandez of Allentown, Pennsylvania, who did not work for DuPont, was all smiles after the vote.

“We’re not a fan of what we see Nelson Peltz do,” Fernandez said.