NAPLES, Fla., April 11, 2016 /PRNewswire/ -- PulteGroup
(NYSE: PHM)'s largest shareholder and founder, William J. Pulte, issued the following letter
today to the Board of Directors:
To the PulteGroup, Inc. Board of Directors:
With all of the media attention that our company has been
getting lately, I wanted to share with you in more detail, in my
own words, and as the largest shareholder and founder of
PulteGroup, Inc., why we must immediately remove and replace
Richard Dugas.
I supported the appointment of Richard
Dugas as CEO in 2003, which in hindsight was a mistake and
perhaps the biggest mistake of my career. As I got to know
Richard, I learned that his education was in marketing. We
made plans for Richard to go work for Norman White, a knowledgeable homebuilder who
served as our Division President in Atlanta. We thought
Richard could learn a lot from Norman.
After Richard became CEO, the first few years were economically
strong ones, but then, because of land exposure, among other
things, the company suffered. I believe that, as the CEO,
Richard Dugas must take
responsibility for PulteGroup's overly aggressive land purchases
that led to significant write downs and losses.
Upon retiring, I told Richard that I intended to allow him to
own and drive PulteGroup's operations and strategy, and that I
would not insert myself into the day-to-day operations of the
Company. Given that I was no longer with the business, I was
not privy to the inside workings. In the last several years,
however, I started receiving all kinds of negative feedback about
Richard, his decisions, and his leadership. Over time, I came to
realize that PulteGroup was not performing anywhere near that of
its competitors, i.e. DR Horton, Lennar,
NVR. This was troubling and led me to take a closer
look into what was going on within the Company. My examination
revealed that Richard had failed on a number of major items and
therefore that the company needed new leadership.
My advice to Richard, because of his lack of homebuilding
experience and in order to compete with his peers, was that he
needed to have a strong team of the best talent in the homebuilding
business. Despite getting this advice, Richard lost or fired
a significant amount of outstanding homebuilding talent across the
company. It is my belief that Richard was either unaware of
how good these people were, or he felt threatened by them.
Our competition went on to hire many of these great
people.
The company's CFO, Roger Cregg,
was someone who I believe saved the company from a potential
disaster during the recession, and left the company to my surprise
and disappointment. In addition to losing this highly seasoned and
respected homebuilding CFO, Richard laid off a number of really
valuable product people. This has hindered product creativity
at Pulte, and I believe it has led to a loss of sales opportunities
and innovation, as reflected by PulteGroup's negligible growth.
Last year, in an effort to help bring a strong homebuilding
financial mind to our company, I asked Jim
Grosfeld if he would consider serving on the board. Jim said
he would be happy to help the Company. At that point, I
contacted Richard and stressed how advantageous it would be to have
Jim Grosfeld on the Board and that
Wall Street would think highly of the move. Further, I
observed that because of Jim's successful track record in single
family homebuilding, I felt that he would be a valuable asset to
the Company and Board as they were lagging competitors.
Thankfully, Richard was receptive to this and Jim Grosfeld was elected to the Board of
Directors. Unfortunately, Jim is being driven out less than
one year into his directorship. I'm not sure what happened,
but I suspect the other board members felt threatened by his
experience in homebuilding and his ideas for Pulte, and maybe,
resentful that Jim exposed the company's leadership failures in
recent years.
With PulteGroup being outperformed by its competitors, I offered
my suggestions and expertise to Richard on how to attract new types
of customers and sales, while having a disciplined and conservative
land investment strategy. And while Richard always said he
would consider my suggestions and get back to me, he NEVER
did. Over the last couple weeks, I discovered why Richard
never got back to me.
As part of his plan, Richard
Dugas and his lack of homebuilding knowledge and experience
hides behind 3 words strung together, "Value Creation
Strategy".
In my opinion, Richard's "Value Creation Strategy" ignores
creativity around product and sales, which is the lifeblood of our
company and which can be pursued while having a return-focused land
investment strategy and a strong, conservative balance
sheet.
(1) The reality is that under Richard
Dugas there has been no "value creation" for our
shareholders with our stock being nearly flat over the last 3
years.
(2) There is no "value creation" with our stock remaining nearly
stagnant in Richard's 12 years as CEO.
(3) There is no "value creation" from our sales which have, over
the last 12 full years, dropped from approximately 9 billion to
approximately 5.98 billion, a decline of over 30%. During that
time, the company also dropped from being the #1 homebuilder to #3
homebuilder.
(4) There is no "value creation" for shareholders under Richard
when, over the last 12 full years with Richard Dugas at the helm, the company
cumulatively LOST more than $530,000,000.
In Richard Dugas' hands,
PulteGroup's "Value Creation" means "Value Destruction".
In my opinion, for the Board of Directors to even consider
letting Richard Dugas stay another
year as a lame duck CEO puts the personal interests of Richard Dugas ahead of the interests of the
company and works to the detriment of the shareholders, the
employees, and our customers, who are watching a board protect a
failed CEO.
With Richard's uniquely disastrous track record of cumulatively
losing so much money, the board is telling shareholders just how
out of touch they are.
Putting the optics of Richard's 'departure' ahead of the best
interests of shareholders, employees, and customers shows how
unresponsive, uninformed, and remote from the needs and desires the
Board is, of Pulte's long suffering shareholders.
How can the board, in good conscience, make a public
announcement giving a long-time losing CEO more time in the
position of CEO, and why until a couple months ago did they grace
him with three of the highest titles – CEO, Chairman and President
– and how could they award Richard over $105
million personally while the shareholders have gotten
peanuts?
PulteGroup, its employees, its customers, and its shareholders
deserve an immediate fresh start and a stop to all of the negative
publicity that Richard Dugas'
ongoing involvement with the Company is creating. How does leaving
Richard Dugas in charge help any of
the shareholders and employees?
In my 66 years of involvement with Pulte, I have never
experienced a CEO like this.
For its bright days ahead – and I do believe that PulteGroup has
a bright future with the right CEO – Pulte needs a proven and
mature single family homebuilding veteran – and not a board member
who does not have experience or knowledge in the single family
homebuilding business. We already made the mistake of having
someone who did not have a long and proven history of single family
homebuilding experience in that position. Further, in my
opinion, the Board must be careful NOT to choose anyone who will be
influenced by Richard's style of management.
Richard has characterized his and my disagreement to employees
as a "family squabble". He couldn't be more wrong. This
is more of Richard Dugas' usual PR
spin on matters of great importance to our company and its
future. No amount of PR firms can spin the facts for you,
Richard. I believe that through Richard Dugas' incompetence and lack of concern
for the wellbeing our employees, he has proven NOT to be a member
of our PulteGroup team.
All of this tells demonstrates how important it is to have
Richard step down immediately.
However, it seems that Richard has convinced Board members that
another year on the job is in the best interests of the
company. I can tell you that Richard
Dugas' involvement is a giant distraction, and I fear that
it will extend his track record of "Value Destruction" for
PulteGroup's shareholders.
It is my belief that one more year with Richard as the lame duck
CEO will ensure a lack of direction and clarity for our employees,
our customers, and our shareholders.
A new and seasoned single family homebuilding CEO, preferably
one who has significant experience as an operator within
PulteGroup, can further the successes and reinforce the values that
made Pulte such an amazing company to work for.
I again demand that you do the right thing for long suffering
shareholders in PulteGroup, and promptly replace Richard Dugas.
Bill Pulte
William J. Pulte
Founder
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SOURCE William J. Pulte