Activist hedge fund manager Daniel Loeb sent a letter to the board of Campbell Soup that strongly suggests the company wait until a new board of directors is in place before selecting a new chief executive officer. Campbell shareholders will elect the board at a Nov. 29 annual meeting and Loeb wants to throw all the current directors out.
Loeb's Third Point, which manages $18 billion, just increased its stake in the company to 6.98 percent from 5.65 percent, according to an SEC filing Tuesday.
The previous CEO, Denise Morrison, stepped down surprisingly earlier this year, leaving interim CEO Keith McLoughlin in charge. Loeb wants to replace all 12 directors and wants that board to select the next leader of the 149-year-old consumer staple, according to the letter.
"It seems to us that the chance of the company being able to attract a first-rate food executive in the middle of a proxy fight is low. No top-notch candidate would join a company when the board that selected them could be replaced within a few weeks," the letter stated.
Loeb has claimed Campbell didn't fully evaluate a potential sale as part of the company's three-month critical review. But Loeb in the Wednesday letter says the new CEO selected by his board would not be mandated to sell the company.
"Can there be any doubt that the independent slate would be better positioned to recruit a first-rate CEO than the current board, which is dominated by two family shareholders who have stood in the way of necessary and important changes to the company for decades?," the letter asked.
Here is the full letter addressed to Les Vinney, chairman of Campbell's board of directors:
Dear Mr. Vinney:
We understand from your recent proxy filing that, almost five months after Denise Morrison submitted her resignation, Campbell ("the Company") is finally searching for a full-time Chief Executive Officer ("CEO").
In fewer than eight weeks, the shareholders of Campbell will have the opportunity to choose a new direction for the Company when they vote for either the Independent Slate -- who together own almost 10% of Campbell shares -- or the current, entrenched Board of Directors (the "Board"). All best practices of corporate governance dictate that one of the most important responsibilities of any Board is to hire and supervise a CEO. Considering how close we are to the Annual Meeting on November 29, 2018 and this Board's poor track record of managing leaders and processes, we think it is entirely uncontroversial to insist that the next permanent CEO be selected by the newly-elected Board.
We believe there are other important reasons that the existing Board should not be charged with running the CEO search at this time.
It seems to us that the chance of the Company being able to attract a first-rate food executive in the middle of a proxy fight is low. No top-notch candidate would join a company when the Board that selected them could be replaced within a few weeks. This person also would be hamstrung by the Board's loud embrace of its "strategic review" plan, which it has asserted is the only way forward for the Company. In our experience, transformative CEOs like to be instigators, not merely executors. They are there to refresh the recipe when the ingredients have gone stale.
Second, a new CEO would be foolish not to insist on a provision in his or her contract that would provide a "golden parachute" upon quick termination. The Independent Slate, at a minimum, would have a duty to critically assess any candidate installed by the current Board and would most likely wish to bring in its own CEO. We believe the Board knows as much. Thus, any termination payments that this Board agrees to in conjunction with hiring a new CEO in the middle of this proxy contest may be grounds for an action for recovery of corporate waste and a breach of fiduciary duty against those directors who provide such a golden parachute.
Finally, can there be any doubt that the Independent Slate would be better positioned to recruit a first-rate CEO than the current Board, which is dominated by two family shareholders who have stood in the way of necessary and important changes to the Company for decades? Third Point has extensive experience in attracting extraordinary executives to lead formerly underperforming companies like Marissa Mayer at Yahoo, Tad Smith at Sotheby's, and Joe Almeida at Baxter. Like these CEOs, a new Campbell CEO selected by the Independent Slate would not be mandated to sell the Company or pursue a pre-set strategy. He or she will have the runway needed to operate Campbell for the long-haul.
We trust that you recognize how inappropriate it would be for the Board to hire a new Chief Executive Officer before shareholders vote on November 29, 2018. However, to assuage shareholder concerns, we request that you respond to this letter no later than October 15, 2018 at 5PM EDT and confirm that you will defer any decision about a new CEO until after the upcoming Annual Meeting.
Sincerely,
Third Point LLC
—With reporting by Lauren Hirsch.
