Rout on Macy’s Board Puts More Heat on Finkelstein
Edward S. Finkelstein, who led R. H. Macy & Co. through a promising leveraged buyout in 1986 and then into bankruptcy reorganization proceedings early this year, has suffered yet another blow to his control of the troubled retailer, raising speculation that his tenure as Macy’s chairman is becoming ever more tenuous.
Earlier this week, the retailer’s seven outside directors voted to take control of Macy’s board of directors and oust six of the company’s nine management directors, the company said Friday.
Macy’s leveraged buyout agreement requires that outside directors take control of the board in the event of a bankruptcy filing. Still, the ouster is seen by some analysts as yet another sign that Finkelstein must quickly reverse the retailer’s sagging operations if he wants to retain his own job. The retailer operates its flagship Macy’s stores throughout the nation, as well as the Bullock’s and I. Magnin department chain stores based in California.
“Finkelstein’s job isn’t in peril tomorrow,” said one New York analyst who asked not to be identified. “But it will be in the future if things don’t start getting better. I think he has until after next Christmas to turn things around.”
Finkelstein’s role as chairman and chief executive of the retailer was already substantially diminished when the company filed for bankruptcy protection in late January. As a result, most of the company’s spending decisions and all non-routine operating decisions must be approved by U.S. Bankruptcy Court Judge Burton Lifland.
Now, Finkelstein, who continues to hold the confidence of the Macy directors, can no longer count on getting the directors’ majority support in the event of a serious disagreement. “His power has been further weakened,” said one company source. “But he had no choice. This is what the leveraged buyout agreement said had to happen.”
Finkelstein, the mastermind of the $3.5-billion leveraged buyout of Macy’s in 1986, has been widely praised for his marketing talents but repeatedly blamed for Macy’s current financial crisis, which stems in large part from his decision to buy I. Magnin and Bullock’s for $1.1 billion in 1989.
A Macy’s spokesman said the directors waited until Monday to fulfill the board membership requirements of the buyout agreement, because they could not agree how best to give control to directors who are not employees of the company.
Finally, the board voted to drop six of its nine company members, leaving only Finkelstein, Vice Chairman Myron Ullman and President Mark Handler. The six will not be replaced. The vote has not yet gone into effect but is expected to become final next week, the spokesman said.
Among those losing his seat is Daniel Finkelstein, the chairman’s son as well as chairman of Macy’s West division. Others are: A. David Brown, senior vice president of personnel; Rose Marie Bravo, chairman of the I. Magnin division; Gertrude Michelson, senior vice president for external affairs; Theodore Ronick, chairman of marketing, and Arthur Reiner, chairman of Macy’s East.
The outside directors are: former Secretary of State Henry A. Kissinger; Louis Page, a representative of shareholder Sir Run Run Shaw; Michael F. Price, the representative of Mutual Series Fund, a major Macy’s investor; A. Alfred Taubman, founder of the Taubman Co., a real estate developer and Macy’s investor; Laurence A. Tisch, chairman of Loew’s Corp. and the CBS network and Macy’s second-largest investor; Paul W. Van Orden, representative of General Electric Co., the largest Macy’s investor, and Sidney A. Weinberg Jr., of Goldman Sachs, the retailer’s investment banker.
