Activist investors now push for minority representation on Kohl’s board

Call for replacements of Schlifske, Prising

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Activist investors have slightly shifted their strategy to take over the board at Kohl’s Corp., reducing their director nominations from nine to five candidates.

The group, which includes Macellum Advisors GP LLC, Ancora Holdings Inc., Legion Partners Asset Management LLC and 4010 Capital LLC and collectively owns 9.5% of the retailer’s outstanding stock, publicly launched a campaign last month to overhaul Kohl’s 12-person board in an effort to improve financial performance.

Kohl’s continues to reject the proposal and tout its own growth initiatives.

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In a revised proxy statement Thursday morning, the investors called on stockholders to elect their five nominees as replacements for who they identify as the five “least qualified” incumbent board directors. Those directors include John Schlifske, chairman, president and CEO of Northwestern Mutual, and Jonas Prising, chairman and CEO of Manpower Group. This is the first time the group has targeted specific board members by name, saying they “lack relevant retail and governance skills to create shareholder value.”

“The investor group believes Kohl’s has tremendous potential, but has suffered under an entrenched board that has overseen poor retail execution and a strategy that has led to stagnant sales, declining operating margins and a chronically underperforming stock price,” the group said in a statement.

Kohl’s responded Thursday afternoon, again with opposition to the group’s campaign.

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“Shareholders should reject the efforts of this slate to impose short-termism and financial engineering to disrupt the Kohl’s business strategy and our ongoing momentum,” the company said in a statement. “The Kohl’s board brings a diverse and relevant set of experiences well suited to support our continued momentum.”

The retailer argued its current board carries a “diverse and relevant set of experience” to bolster financial growth and post pandemic recovery. Sales were down 20% last year, and 10% for the fourth quarter.

What’s more, Kohl’s has made an effort to refresh its board, adding six new directors since 2016. A 12th board spot was added in February with Robbin Mitchell of Boston Consulting Group.

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Kohl’s said its current directors “outmatch” the activist investors’ nominees in relevant experience, with backgrounds in retail, consumer-facing industries, technology, and investment and capital allocation. Four directors are current or former retail CEOs.

The activist investors’ five nominees include Jonathan Duskin, principal of Macellum; Margaret Jenkins, a former chief marketing officer at Denny’s Inc.; Jeffrey Kantor, former chairman at Macy’s Inc.; Cynthia Murray, former president at Chico’s; and Thomas Kingsbury, former CEO of Burlington Stores.

If all five are elected, they would represent a minority of the entire board, which means that the group’s proposed plans may not be implemented. Nevertheless, it would be an “important step in the right direction,” according to the proxy statement.

Kohl’s said it will meet with the activist investor group again next week. The company’s board is set to present its recommendation of the nominated director replacements and shareholders will vote at the 2021 annual meeting. A date has yet to be publicly announced.

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