DuPont CEO Ellen Kullman's abrupt departure
Ellen Kullman, DuPont's chief executive officer and chairwoman, will step down from both positions and retire from the company on Oct. 16, the chemical company announced Monday.
The abruptness of Kullman's departure has some speculating that Kullman was asked to resign. There has not been such a sudden departure of a DuPont CEO in recent memory. When Kullman took the helm in 2009, she was the first woman and the 19th executive to lead the company founded in 1802.
"It's a big stunner," said former DuPont Chief Executive Edgar S. Woolard Jr. Earlier this year, Woolard, the former Apple Computer Inc. board chairman credited with helping to bring Steve Jobs back to the company, said he believed Kullman had developed a winning strategy for the company.
"It's sad. I hate to see her end up this way," said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. "She was handed a bad set of cards when she came in. The issues at DuPont go back a long time. It wasn't her doing."
Current DuPont board member Edward Breen will assume the role of interim chair and CEO while the board searches for a full-time replacement. During an analyst conference call, Breen said the board has tapped an executive search firm to spearhead the hunt for a new CEO to lead the company valued at $66 billion, but declined to provide a timeline. Breen, who joined the board earlier this year, also cautioned analysts not to read into the fact that a newer board member will assume interim CEO duties.
On the same conference call, Kullman gave a short explanation for her sudden departure: "With the separation of Chemours completed and strong growth in place, the board and I believe now is the right time for a new leader. I believe I'm leaving DuPont well-positioned to capture the possibilities before it. I just want to say what a privilege it has been to lead the company at such a transformative time."
According to a Securities and Exchange filing, Kullman waived her advance notice requirement that stipulates DuPont executives must give 60 days' notice before leaving the company. She will receive a severance package of roughly $2.8 million, payable over a one-year period following her Oct. 16 departure, according to the SEC filing. Last year, Kullman sold $37.5 million in DuPont stock, a move that drew criticism from activist investor Nelson Peltz of Trian Fund Management, which lost a proxy fight against DuPont in May.
Kullman earned praise for fending off Peltz, who nominated four individuals, including himself, to seats on DuPont's board. He argued that the Fortune 500 company's six business units, with roughly 60,000 employees in over 90 countries, should be broken up. She came out victorious at a shareholder meeting that ended the bitter, four-month proxy fight with Trian.
However, DuPont's stock has dropped from $71.08 a share on May 12, the day before the shareholder meeting that turned back Peltz, to as low as $47.32 a share on Sept. 28. Following the vote, Kullman set in motion big changes at the company, including a spinoff of its chemicals business into a new company, Chemours, and a range of cost-cutting moves. (DuPont stockholders received one Chemours share for every five shares they owned in the new company's former parent.) DuPont has lowered its earnings outlook for 2015, saying it now projects an operating profit of $2.75 per share for the year, a drop from its prior forecast of $3.10 per share.
Meanwhile, Peltz's Trian, which owned 2.8 percent of DuPont shares in May and stood as its fifth-largest investor, has increased its stake in the company. Ed Garden, founding partner and chief investment officer for Trian, made the announcement on CNBC Monday, but declined to say what percentage of shares the additional holdings add up to. Peltz declined Monday to comment on Kullman's resignation, which was announced after the stock market closed. In after-hours trading, DuPont stock rose 5.73 percent to $54.22.
David Larcker, a professor of corporate governance at Stanford University Graduate School of Management, called Kullman's resignation "unusual."
"She is in the sweet spot of her career and certainly not at retirement age," he said. "Something had to precipitate this."
Larcker cautioned that it is difficult to know at this juncture what led to Kullman's resignation. One possibility, he suggested, was damage caused by Peltz during the proxy fight.
"There may have been some residual pressure from the proxy war," he said. "To use a baseball analogy, sometimes proxy contests have multiple innings to be played. The fact that Peltz upped his stake might be a way to say, 'You've won this round, but we are not going away.' "
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Peltz's influence will likely be felt moving forward, Larcker said, noting that large companies typically consult with their biggest institutional investors for input on a new CEO.
"Clearly, he's going to have some influence on the succession," Larcker said.
While Kullman's cousin Jack Healy said he was by stunned Monday's announcement, he doesn't believe she gave up.
"She's a Healy. We're not good at that," he said. "I wrote her a congratulatory email and told we're so proud of her."
Cousin Sharon Baker echoed those sentiments.
"The only way she would walk away from that position would be if her principles were compromised in some way," Baker said. "Her loyalty to a job and finishing a job runs thick and deep. It's not in our fabric to walk away from a challenge."
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Kullman didn't give any hints of a coming departure in recent public appearances. She was honored Thursday at the Hotel du Pont with the 2015 Pete du Pont Individual Freedom Award, which celebrates Delaware's collaborative ability to meet challenges facing the state, among other things.
"This year's honoree, Ellen Kullman, will tell us of her efforts to continue DuPont's current transformation on a pace and path of its own choosing," Ben du Pont, Pete's son, wrote in a Delaware Voice column for The News Journal.
She also spoke Wednesday at the Council of Institutional Investors conference in Boston. Her topic was titled "A Leader Looks Ahead."
Reuters quoted Kullman as saying DuPont's stock price, which had fallen 32 percent from the day before the proxy vote, "is a concern."
Delaware State Chamber of Commerce President Richard Heffon said he was surprised by Kullman's action, and had no inside information or warning.
"The fact that she would be leaving the company wouldn't surprise me," Heffron said. "The fact that it's happening Oct. 16 is a surprise. A lot of things have changed at DuPont over the past couple of years, and I think a lot of them have been surprising to people. But things change pretty quickly in today's world."
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In a statement released late Monday, Gov. Jack Markell praised Kullman, a native Delawarean.
"Ellen Kullman has been a transformative leader at DuPont, steering the company through the worst economy in memory and transforming DuPont to focus on high growth businesses," the governor said. "She was instrumental in setting a new direction for DuPont and I am grateful for her leadership and commitment to Delaware."
Robert Byrd, one of Delaware's most influential lobbyists, said Kullman's departure "is one more indication that DuPont is a company that is very much changing, like the rest of the world."
"She led them through some tough times. She got the big win," Byrd said. "But they decided to move out of the City of Wilmington. That was a big change."
Kent Reasons, president of the DuPont Agricultural Products Retirees Group who lives in Chadds Ford, Pennsylvania, said he did not know Kullman socially but did meet her through work.
Her sudden resignation "caught me by surprise," Reasons said, "especially with a 10- or 11-day lead time on it."
Reasons predicts the thousands of DuPont retirees who pulled for Kullman during the proxy fight will say, "We're sorry to see her go. We think she's done a good job. ... But what's next?"
Dozens of workers leaving DuPont's Chestnut Run headquarters minutes after the resignation announcement declined to comment. A few spoke on the condition that they not be named, and all were shocked.
"I just heard about it 20 minutes ago," one DuPont employee said on the way to her car. "I'm trying to understand it."
"I'm shocked," said another. "Normally, we do things with more of a planned process. This seemed quite sudden."
Byrd said he hoped Kullman would continue to use her leadership skills in Delaware.
"She has been very involved in the Delaware community," Byrd said. "She just was the chairman of a capital fund drive for the Boys and Girls Club. She's been very involved in things around Delaware, and she's going to be missed. Hopefully, she stays in the community, and we get the benefit of her experience."
Contact Maureen Milford at (302) 324-2881 or mmilford@delawareonline.com. Contact Jeff Montgomery at (302) 678-4277 or jmontgomery@delawareonline.com. Contact Jeff Mordock at (302) 324-2786, on Twitter @JeffMordockTNJ or jmordock@delawareonline.com.