Breaking News
'99 Narse Chicago Meeting /
Sears Shareholders' Meeting
Sears Shareholders Meeting - May 13, 1999
Question and Answer Summary
The following summarizes the questions asked by NARSE
members. The thrust of the questions is accurate because our questions were prepared
before the meeting, and some were even read to Mr. Martinez. Since we were not allowed to
record his responses and since we all lack any level of stenographic skills, we have to
paraphrase Arthur's responses and try to do so without, in any way, distorting the
substance of those responses. In the few instances in which we can accurately quote exact
words, we do so. More detail will follow when we have the meeting transcript:
Mr. Chairman, I have the privilege of volunteering for the
National Association of Retired Sears Employees. Our new organization enjoys the support
of more than 40 retired presidents and officers of Sears, Roebuck and Co., a mailing list
exceeding 18,000 retirees with an average of 32.5 years of Sears service, and the support
of the huge majority of the retiree family of 133,000 people.
Twenty months ago, you communicated your decision to
retroactively reduce over time to a maximum of $5,000 the earned life insurance benefit of
all Sears retirees. It reversed the promises of your predecessors, disrupted the lives and
plans of 84,000 retiree families, materially impacted old people, sick people, rich and
poor people, and made many chose between the purchase of medicines or life insurance,
between their own needs and their desire to do for their families; Sears retirees have
become loud voices critical of the quality of your decision-making. We think that you and
a 42 billion dollar company have alternatives. We think that you have no compassion.
But, I want you to know that, thanks to St. Anthony, not
every retiree stays outspoken about you. My friend and our organization’s champion,
retiree Joe Kehoe, died last year. The night before he died, Joe said "I would tell
you what I think of Arthur Martinez but I promised St. Anthony I would not swear."
Joe's wife Arlene got a percentage of his promised life insurance. She should have gotten
it all.
Almost all communication with retirees stopped when you
arrived in 1993. There have been the required health care related correspondence ... with
one in 1995 communicating to retirees your decision to freeze the Sears contribution to
retiree health care. Hundreds of letters have been sent to the Sears Board of Directors.
Before he retired, benefits Vice President Jim Bronson said in public that there were more
than 20,000 negative retiree calls and letters following your life insurance decision.
Dozens of retiree and customer petitions have been sent to you... some with as many as 554
customer signatures. Sears retirees have demonstrated hundreds of times in scores of Sears
and other locations nationwide. In the one meeting that you allowed with our leadership,
you refused all four of our requests.
12 days ago, all retirees received from Sears at their home
addresses a piece titled "retiree news". Although this very first effort at
communication is appreciated, the timing on the effort (12 days before this annual
meeting) is at best suspicious. At any rate, it is an aspirin to cure the cancer of
serious financial takeaways, none of which were mentioned in this issue of retiree news.
This is a very incomplete stack of newspaper articles (prop
held in air) dealing with the retiree life insurance issue ... add cable tv, CNN, USA
Today, and coverage from scores of local papers and the depth of the Sears public
relations debacle can be appreciated. By the way, every call, letter, demonstration,
petition, and request have been ignored. Clearly, it is the company's strategy to ignore
the public relations conflagration and Sears retirees. With that background, I have these
2 questions:
First, when will you chose to end the public relations blood
letting and sit down with or empower a senior Sears officer to sit down with retirees to
discuss life insurance and other retiree issues?
Answer: …“willing to sit down with NARSE
leaders…will not discuss pending litigation” Editor’s note: Mr. Martinez
seemed surprised when told that the NARSE request for a meeting two weeks ago was refused.
Second, your decisions and actions clearly communicate a
focus on, a disrespect, and even a contempt for Sears retirees ... why?
Answer: “respects” retirees Editor’s note: Mr.
Martinez has shown some weird ways to show his respect.
Mr. Chairman, the proxy statement lists potential legal
liabilities. It does not mention the retiree class-action suit. Why not?
Answer because it is "not material to
shareholders". Editor’s note -- this means that the company is so confident of
the legal outcome of our case that they do not consider it a potential liability. I guess
Judge Moran in Chicago will be thrilled to know that his decision has been made for him.
Our hard-working and optimistic attorneys will be disappointed to learn how wrong they
are. Arrogance has many faces; this is but one of them
Good morning Mr. Chairman, as chairman of NARSE, I support
the proposal to elect directors on an annual basis. My question is directed to you and the
Board of Directors. The major role of a Chief Executive Officer and the Board of Directors
is corporate strategy and executive continuity. Sears strategy, to use it your own words
from a recent meeting is in a "stall point".
The recent newspaper article stated that your Vice President
of Transformation informed a class of university students, "we are almost back where
we were in 1993". Therefore, as a shareholder, I must address the issue of executive
continuity.
Chief executive continuity, assuming Sears bench like most
fortune 500 companies is chosen from senior executive officers named in their annual
report. Since Sears annual report was published, two of the senior officers listed have
left the company.
On page 49 of the annual report, just two of those remaining,
Mr. Stewart and Mr. Salter were with Sears when you arrived, a mere six years ago. Mr.
Stewart is the only president with extensive Sears experience. Seven all of the 11
remaining senior officers have been with Sears less than three years, three Aug. 7 less
than six months. Two officers on the dias are new hires.
In the past 18 months, a double-digit number of Sears
officers, most in crucial corporate positions; chief financial officer, general counsel
and Secretary, president credit, executive vice president marketing, senior vice president
human resources, vice president benefits, and senior chief information officer, just to
name a few are no longer with the company.
Successful companies like General electric, Wal-Mart, and
Kohl’s have virtually no executive turnover. They create a corporate culture that
rewards performance and experience. They develop a bench to call upon when an opening
occurs.
As a shareholder, I am deeply concerned with the
unprecedented senior executive revolving door at Sears. Excessive executive turnover has
an unsettling and disruptive effect on organizations. Results can include the negative of
long-term impact on sales and profits. My questions are: one… please articulate Sears
internal senior executive continuity program. Two … if the future is so bright, why
are so many officers leaving Sears? Three… Can you say with confidence that more
senior executives will not leave Sears this year? Four … you have stated that the
retiree class-action suit is not material, then the why not reinstate the benefit today
the life insurance benefit today?
Answers … Sears continuity question We meet
twice a year and have the bench and still have promotion from within "we have
strengthened ourselves" Why are so many key people leaving? People make their
“own decisions their own way for their own reasons" Will there be more turnover?
Impossible to say If the class-action suit is not material, why not return the life
insurance benefit today? It's not material as a legal liability.
Will Sears give NARSE the names and addresses of retirees,
the database that we have asked for in the past? Why did Sears sell the Sears retiree list
to Allstate so that Allstate could solicit us to sell life insurance?
Answer … Mr. Martinez turned this question over to Human
Resource Vice President John Sloan who answered that Sears did not sell the retiree list
to Allstate. When will integrity be returned to Sears? Was a rhetorical question
concluding this questioner’s time.
Another question traced the Sears progression for writing off
delinquent credit accounts (the number of days since the first payment was missed) from
210 days to 240 days to 270 days back to 240 days. Editor’s note … Credit
President, Alan J. Lacy’s answer was not understandable. He got the best laugh of the
day when he said that the industry standard was 240 days. Credit professionals like Leo
Murphy and Bill Monroe dispute Lacy's 240 day statement.
Another retiree picked up on Mr. Martinez's earlier comments
on not selling the Sears retiree list. He reminded the chairman that we had received a
letter from Sears VP Tim Devereaux asking retirees to purchase life insurance.
Answer … Arthur explained that Sears “made
money” on these solicitations and that the solicitation was a Sears effort not an
Allstate effort implying that possession of the retiree list did not leave Sears.
Editor’s note … its wonderful to know that retirees are a source to make money
for Sears but not worthy of the expense of their earned and paid for retirement benefits.
That same questioner recounted how his wife tried to make a
purchase in a Sears hardware department in California, showed two pieces of retiree
identification and had to wait for a special management approval for the sale. Is this
procedure Sears national policy?
Answer … no
Mr. Chairman, I respect your inability to discuss our
class-action suit. As a director of NARSE media relations … living in the greatest
country in the world… made possible by our great judicial system … in the most
important "court" of public opinion, I and NARSE will continue to battle for the
restoration and protection of benefits in the "court of public opinion". Arthur
Martinez, we will not go away.
In your new and recently published "Sears spring 1999
retiree news" you announced "customer service contest...associates wow us with
their stories". The article mentioned how pleased you were with the associates who
went the "extra mile". We have heard that has in January 1998 Sears discontinued
life insurance for employees and rumor has it that at the end of 1999 there will be
reductions in health benefits...you ask the employee to go the "extra mile" but
you don't go the extra mile for the employee. Please respond.
Answer … assurances that Sears reveres its associates
Any further changes to the Sears pension plan for current
associates contemplated?
Answer … no
How can Sears succeed and compete on a gross margin of 23.7%?
Answer … Mr. Martinez confirmed 23.7 % as an accurate
number and said there is still some “room” between Sears and Wal-Mart inasmuch
as Wal-Mart's gross margin is in the height teens.
Editor’s note … Wal-Mart's 1998 gross was 21.2
percent; their first quarter 1999 gross is 21.10 %. Did Chairman Martinez misspeak or
could it be possible that chairman of Sears, Roebuck & Co. does not know the gross
margin of Wal-Mart?
Additionally, there were two “softball” questions
reported to be from internet participants.
Far too few questions were presented and answered
because of the abrupt closing of the meeting.
The following is a question that we were unable to ask that
desperately needs asking:
| According to the Fortune magazine list of
largest U.S. corporations, Sears ranks 85th in profits -- down 11.8 percent from 1997.
Wal-Mart ranked 13th up 25.6 percent over 1997. In shareholder equity, Sears ranked 99 and
Wal-Mart ranked 13th. Wal-Mart ranks third place in market value -- and Sears stands at
120th. Sears ranks 330 out of 500 in profits
as a per cent of revenues. Profits as a percent of assets, Sears ranks 272 and home Depot
ranks 30th. Earnings per share, Sears ranks 279, down 10.4 percent from 1997 -- Wal-Mart
at 35th Place, up 18.3 percent. An all-important investor consideration -- return on
investment, Wal-Mart up 107.7 per cent, Home Depot up 108 per cent -- and Sears down 4.4
percent
Sears year end stock price on the big board 1994 -- 95 -- 96
-- 97 and 1998 ranged between 39 and 42 dollars per share. Sears stock has moved up in the
last two weeks -- however, it is still far below the 52 week high. The Dow has hit 11,000.
Question … do you accept the
responsibility for Sears lack of performance and what are your specific plans to regain
investor confidence? |
The NARSE Annual Meeting - May 12, 1999
Claude Ireson open our meeting with the pledge of allegiance
and a moment of silence and prayer for Joe Kehoe.
Ev Buckardt presented the prestigious KMAA award (a 20 lb.
Gavel) to Tom Dowd in recognition of his contributions. He presented the more prestigious
and more deserved “Joe Kehoe” award to George O'Hare.
Ken Johnson provided the secretary’s report, the minutes
of our last meeting, and a summary of our April 20 meeting in Atlanta. Representing Roy
Harris, our treasurer who was absent, Ken gave the financial report. Year-to-date we've
spent $35,000 and received $62,000 in contributions/dues. $28,000 was spent on
communications.
Ev Buckardt provided a class-action update. Pending before
Judge Moran is the Sears request for dismissal. It is expected that Judge Moran will not
dismiss our case. In all likelihood, there will be a September/October trial before the
judge, and the best advice from our attorneys and others is "keep the faith".
Pete McMahon supervised the nomination and election of
officers. That slate has been put on the Internet and will be published in an issue of
“Straight Talk”.
Bill Barker, Leo McCormack, and George O’Hare covered
details of our next day's activities.
Ken Johnson reviewed the format for the next day’s
Q&A and read some of the prepared questions.
Tom Dowd moderated a one-hour input session. With heavy
participation, the 70 retirees at this meeting provided a wealth of information that will
be extremely useful to NARSE. Their input is reported separately on the Internet
(www.narse.org).
George O'Hare closed the meeting with his usual and much
appreciated enthusiasm
Our meeting was more like a family reunion than an
organization’s annual meeting. It was very well attended and too much fun to be
called a meeting!
Sears Shareholders Meeting
Update - May 11 1999
Dear N.A.R.S.E. Members, This year's
annual Sears Shareholders Meeting was as exhilarating as it was frustrating. We can thank
our retiree family for the exhilaration and Arthur Martinez for the frustration.
Our day began well. Over 60, yellow shirted retirees met in
front of the Day’s Inn, received signs for demonstrating from Leo McCormack, and
marched to "the corner bakery" for breakfast. We were led by a 6-ft. 3-in. 270
pound bagpiper named Dwayne Coleman, a 5 ft. 3 in. 145 pound George O’Hare (the
cheerleader with the handheld bullhorn), and pallbearers carrying the casket symbolizing
Sears lost values.
At 7:45 am , early rising Atlantans were serenaded with 40
minutes of chants like "shame on Sears" and "Arthur, we won't go
away". By this time, the retiree parade numbered over 70 and represented retirees
from California, Texas, Florida, Chicago, Massachusetts, Atlanta, and too many locations
to name here. It was so obvious that the strategy to move the Sears Shareholders meeting
from Chicago to Atlanta so as to avoid those persistent retirees with those difficult
questions had failed.
Outgoing N.A.R.S.E. Chairman Claude Ireson, incoming Chairman
Ev Buckardt, and Tom Dowd made brief remarks and answered questions for the press in
attendance. Those remarks will be posted on the Internet shortly at www.narse.org. Then it
was off to the Apparel Mart for the Sears meeting. Radio station WSB reported our
activities even before the start of the Sears meeting. TV and newspaper coverage followed.
We were deeply honored to have Martin Luther King III attend
the Sears meeting in support of Retirees. The Rev. Randall Osborne, the Chairman of the
Southern Christian Leadership Conference, took the time to join us. We appreciate their
presence and the stature they add to our cause.
King Arthur opened the meeting by announcing that next year's
meeting would be in Chicago and that this was the first annual meeting to be presented
live on the Internet.
Early in the meeting, corporate governance expert Martin
Glotzer voiced strong support for Sears retirees and pressed Chairman Martinez to make
available for nominal cost to interested shareholders an unedited transcript of the entire
meeting. Mr. Glotzer’s thoughtful words were greeted with heavy and sustained
applause. King Arthur agreed to do so, and this is significant because we will request
such a transcript so that Arthur’s exact words can be public …… so that
individuals can judge for themselves whether he answered or avoided questions, whether he
met issues head-on or danced around them, or even whether he answered the questions asked
at all.
Chairman Martinez reviewed the company's performance in a way
that one would think that 1998 was a good year for Sears. To his credit, he said that
results were "not consistent with the results we have come to expect", and that
apparel sales were "lackluster." Still, his listing of company strengths
(credit, home appliances plus 9 % , lawn and garden plus 10 %, dealer stores, the
internet, paint and hardware, parts direct, private brands, highlighting the value
proposition, the "great indoors," and the "shareholder friendly”
[wow!] sale of assets like Western Auto and Home Life) all but concealed the fact that
1998 results were neither acceptable nor competitive as well documented by the April 26 in
depth Fortune Magazine analysis. 1998 was a poor performance year for Sears, Roebuck and
Co.
Motions were voted on with the issue of directors standing
for re-election annually receiving 49.081% of shareholders supporting this change.
As a real positive, 5 Sears associates were honored for
exceptional customer service.
Let's set the tone for the question and answer session. By
the way, the content of many of our questions and paraphrased responses will be reported
to you separately. You should know that there was an increased intensity to our
questioning this year. We take the privilege of representing the voice of Sears retirees
very seriously. In preparation for the Shareholders Meeting, we prepared many substantive
questions with some probing the company's poor performance and others the decision to take
benefits from retirees.
The question and answer session started at 11 a.m. and was
suddenly, prematurely, and unexpectedly gaveled to a close by a stressed Martinez at 11:40
am. Picture 3 microphone stations staffed by a Sears associate whose job it is to
introduce shareholders with questions. At 11:40 a.m. with most of our questions not
presented and not answered, all three stations had retirees waiting to ask questions, and
the Sears associates were each holding more question cards. Mr. Glotzer was on his feet
shouting for recognition.
Now you can begin to appreciate our frustration. We believe
that a Chairman supervising poor performance and earning millions of dollars a year is
paid enough to answer all shareholder questions.
There are striking differences between our
N.A.R.S.E. annual
meeting and the Sears annual meeting the next day. Our meeting saw 63 people with shared
values and trust in each other gather to focus on returning a well earned benefit to
members of their retiree family. In a very straightforward way,
N.A.R.S.E. representatives
reported successes, failures, and specifics on membership, financials, and any subject
that prompted questions from retirees. When asked in a one hour session to give
N.A.R.S.E.
the input and suggestions that would make us grow faster and make us more effective, the
feedback was bone honest, smart, from the heart, and truly useful. In contrast, we left
the Sears annual meeting wondering which shell held the pea … which sleeve held the
ace.
Given time to think, we soon found the powerful cure for any
feelings of frustration. It was the good nature, the attitude, and the loving support
provided by proud people. At great personal expense and effort, they came to Atlanta to
tell Arthur Martinez what they think of decisions that threaten the well-being of their
and other retiree families. They may even have looked a little silly marching and
chanting, but their message is clear. Integrity and commitment takes action. They
don’t go away.
As your new Chairman and President, you just can’t
imagine how proud we are to be associated with people like that. We thank them and all who
have done so much to tell our story and promise to meet the high standards they set for
us.
Ev Buckardt
Clif Hooks |
Listening to Retiree Straight Talk
