Saks Shareholder Wins Proxy Vote But CEO Sadove's Not in a Bind

Target not withstanding, some contests between shareholders and retail management go to the folks holding the stock, as a vote at Saks annual meeting demonstrated on Wednesday.

While it failed on a measure to withhold votes and defeat board nominee C. Warren Neel, hedge fund P. Schoenfeld Asset Management, which holds a 1.5 percent stake in Saks, did convince shareholders to vote for two of the three proposals it made in the company’s annual elections. It won on a proposal that would end staggered board elections and another that would restrict board terms to a single year.

In some ways, the entire effort was a critique of Saks CEO Steve Sadove’s performance. However, his board term doesn’t expire under current rules until 2011. So Schoenfeld suggested in a statement filed with the Securities and Exchange Commission that voting for its initiatives gave shareholders the opportunity to make their dissatisfaction with how Saks is run clear to the entire board, including Sadove.

In its rebellion against management, Schoenfeld pointed to weak sales and declining share prices, but it especially criticized management’s poor performance in the past holiday season.

In the SEC statement, Schoenfeld noted its belief that Saks entered the fall of 2008 with excessive inventory and purchase commitments, a situation that caused management to overreact when demand was less than expected and introduce disruptive discounting, with the result that the entire price structure that the department store built its operation around was severely undermined. Indeed, the hedge fund, in its statement, quoted from a Wall Street Journal article in which Sadove himself questioned whether the retailer can again convince customers to pay full price for its goods.

By winning on two of the three proposals it offered, Schoenfeld made its point, but it may not have done more than that because the votes were non-binding. Sadove said he would, basically, take them under advisement. William Ackman has been advising Target for years, but that hasn’t done much to change direction there. Of course, Target has performed better than Saks, but Sadove can always wait it out and hope some bright idea or an economic turn around can weigh in before he’s up for reelection to the board in 2011.