PulteGroup (PHM) Founder Makes New CEO Demands

There is another twist to the battle between homebuilder PulteGroup, Inc. (NYSE:PHM) and the company’s largest shareholder and founder, William J. Pulte.

This time William J. Pulte has made public a letter that he sent to the board of directors of the company detailing the necessary qualifications that PulteGroup’s next chief executive officer (CEO) should possess. Pulte owns approximately 8.9% of stake in the company.

PulteGroup’s long-time CEO, Richard Dugas, will retire as Chairman and CEO in May next year. Pulte believes that the CEO candidate should possess public homebuilding company CEO experience or at least 25 years of homebuilding and land acquisition experience. He believes the candidate should have relevant experience of managing multiple homebuilding operations in multiple U.S. markets, operating in a recessionary environment and building effective leadership teams at senior levels of an organization.

In a bid to expedite the search process, Pulte said that “tangible results” from the same should be available before July 31. Pulte also expressed interest in working constructively with the board to identify the next CEO.

Pulte claimed that he received a letter from director Patrick O'Leary's in May inviting him to suggest candidates to succeed Mr. Dugas. The letter also informed him that the board has retained an executive search firm to assist in the CEO search process. However, the board, in an SEC filing, disclosed the letter sent by Patrick to Pulte. The letter clearly stated that the CEO search process would be confidential and Pulte’s role in the same was “limited to the request for candidate names”.

In April, Pulte, made public a letter he had sent to the board that recommended the immediate removal of Dugas from the post of CEO and a change in the company’s direction. Pulte expressed his displeasure over the company’s announcement that Dugas will retire next year and requested the board to accelerate the process. Bill Pulte, his grandson, and another board member, Jim Grosfeld, criticized Dugas’ decision to move the company’s headquarters to Atlanta as well as change its overall performance strategy.

In another letter, Pulte demanded that lead independent director, James J. Postl, should resign immediately from all his positions in the company. In response, James J. Postl, issued an open letter to its shareholders stressing the board’s strong support for Dugas and the company’s value creation strategy which “has produced significantly higher profitability and shareholder returns.”

Not paying heed to Pulte’s requests, shareholders overwhelmingly re-elected Mr. Dugas as chairman and chief executive, along with all 10 director nominees, at Pulte’s annual meeting in May.

PulteGroup carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the construction sector are TopBuild Corp. (NYSE:BLD) , Simpson Manufacturing Co., Inc. (NYSE:SSD) and Installed Building Products, Inc. (NYSE:IBP) . All the three stocks sport a Zacks Rank #1 (Strong Buy).