By Jacob Bunge And David Benoit
CHICAGO-- DuPont Co. Chief Executive Ellen Kullman honed her
management chops decades ago bargaining with big customers and
suppliers as head of a $2 billion-a-year unit that sold titanium
dioxide, a pigment used to whiten paper.
"You learned how to play poker pretty quick," the 59-year-old
CEO recalls.
Now she's marshaling that same mixture of resolve and finesse
for a different competition with much higher stakes: persuading
DuPont's shareholders not to let activist investment firm Trian
Fund Management LP join her board and upend her strategy for the
212-year-old company, which she has run since 2009.
With a vote weeks away that could alter DuPont's future, Ms.
Kullman and the man who has become her rival, Trian CEO Nelson
Peltz, are crisscrossing the country with their teams to court
shareholders. The rival camps have bumped into each other in an
investor's office on at least one occasion.
Trian says DuPont should slash bloated corporate spending and
simplify its businesses to improve earnings growth--perhaps by
splitting apart. Trian wants four board seats--including, most
important, one for Mr. Peltz--and is seeking to oust the heads of
several key board committees. Trian's campaign has made DuPont,
with a market capitalization of about $65 billion, one of the
biggest companies to face such a proxy fight with an activist.
In her first interview since the proxy battle was launched in
January, Ms. Kullman argued that Mr. Peltz wants to establish a
"shadow management" team dedicated to pushing a short-term agenda.
She said that DuPont already is cutting $1 billion in costs and
pursuing other efficiencies, and that Trian lacks both the
expertise and the patience needed to steer an
agriculture-and-chemical company whose products may require a
decade or more to launch--contentions Trian strongly disputes.
"Can you cut costs and create a bump short-term? Yes, but where
are you going to be in two years, in five years? Do you exist in
10?" said Ms. Kullman, who also is DuPont's chairman. "My concern
is that it's creating a time frame that doesn't make sense in the
course of business."
Ms. Kullman, who grew up near DuPont's Wilmington, Del.,
headquarters, earned her bachelor's degree in mechanical
engineering at Tufts University and, later, a master's in business
at Northwestern University's Kellogg School of Management. She
joined DuPont in 1988--along with her husband, who retired in
December 2012--after a stint at General Electric Co., where she
worked with current CEO Jeff Immelt.
Ms. Kullman said she "fell in love with DuPont" when she
realized she was good at connecting its science to the marketplace.
Colleagues describe her as a focused thinker comfortable with
technical topics, though less gregarious than other executives. The
co-captain of her high school basketball team, she also has a deep
competitive streak.
Her sparring with Trian resembles the sometimes contentious
dealings with big chemical clients in the 1990s. Charles Holliday,
Ms. Kullman's predecessor at DuPont, said she held her ground with
customers who occasionally threatened to take their business
elsewhere.
"She listened but at the end of the day she had to be firm for
the DuPont shareholder," said Mr. Holliday, who is set become
chairman of Royal Dutch Shell PLC in May. "She's extremely calm
under pressure."
Ms. Kullman made her reputation at DuPont by building new
divisions, including a safety-consulting business Mr. Holliday
convinced her to spearhead in 1998, and expanding established
operations like the titanium-dioxide unit.
In that role, she strapped on rain gear and goggles to inspect a
plant in Taiwan in the eye of a major typhoon in the mid-1990s,
recalled Jeff Keefer, a former DuPont executive who now advises
investment firm CVC Capital Partners. Mr. Keefer said local
managers suggested postponing the inspection. Ms. Kullman recalled
that she felt proceeding with the inspection was important, though
she skipped clambering up to the plant's catwalks.
With investors, Ms. Kullman has highlighted links among DuPont's
sprawling research and marketing operations, whose combined
benefits sometimes aren't obvious. Some investors say her technical
background bolsters her arguments.
DuPont shares have climbed about 185% since Ms. Kullman took
over as CEO in January 2009, compared with a 132% rise in the
S&P 500 stock index.
"Her credibility is high, because she's walking the talk," said
Kevin Walkush, an analyst with Oregon-based Jensen Investment
Management, which owns 1.87 million DuPont shares. Mr. Walkush, a
former chemical engineer, met with Ms. Kullman and other DuPont
officials in late February.
Mr. Peltz, a veteran boardroom deal-cutter, has told investors
Trian will hold DuPont to a higher standard by plunging into its
operations and financial data. Trian says the company won't hit its
earnings targets without changes and cost cuts. Mr. Peltz strongly
rejects the idea that Trian is focused on the short term, and touts
the fund's history helping chart more profitable courses for some
of the biggest names in the industrials and consumer-goods sectors,
with Trian remaining an investor for years in some.
"Ellen Kullman clearly means well and is trying hard, but
DuPont's portfolio moves have failed to create a 'higher growth,
higher value company,'" said a Trian spokesman.
"Trian has a long-term owner's perspective," he said, and its
board nominees, if elected, would work "collaboratively with Ms.
Kullman and the rest of the Board to address DuPont's fundamental
issues."
Trian's track record is persuasive for some DuPont
shareholders--particularly those who say their funds have benefited
from the firm's past campaigns to revamp companies like PepsiCo
Inc., Mondelez International Inc. and H.J. Heinz Co.
"Trian's history speaks for itself," said Hank Smith, chief
investment officer at the Haverford Trust Co., which owns 1.3
million DuPont shares. Mr. Smith, who participated in a conference
call with Trian officials last month, said "their arguments are
pretty persuasive" and putting Trian representatives on DuPont's
board "doesn't seem that unreasonable."
In the May 13 vote, the 12 nominees who garner the most shares
voted among the 16 candidates will win election. The proxy fight is
unusual partly because about 30% of DuPont's stock is held by
individual investors, rarely courted in such corporate campaigns
because they often don't vote. But DuPont and Trian are sending
direct mail and emails, and are dialing up individual holders,
which number some 600,000, filings and people on both sides
said.
"The rule in proxy fights traditionally is you want every friend
you can get," said Charles Elson, director of the University of
Delaware's center for corporate governance.
Both sides are seeking out blue-chip testimonials. Mr. Immelt
said in an interview that Ms. Kullman possesses "a nice blend of
edge and intelligence and operational skills." Trian, meanwhile,
quotes Mr. Immelt on its website for the DuPont campaign praising
Mr. Peltz for bringing "a clear perspective on shareowner value to
every discussion."
Ms. Kullman said she relies on her engineering training to take
a "disciplined approach" to the proxy fight. "You prepare, you
build a great team, you hold them accountable, you communicate a
lot, and you keep trying to figure it out," she said.
Write to Jacob Bunge at jacob.bunge@wsj.com and David Benoit at
david.benoit@wsj.com
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