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Dillard family feels the wrath of activist investors calling for its removal

The family owner-managers of Dillard's, the American retailer, have been castigated by two activist hedge fund investors who are calling for the family to be removed from the company.
 
In a letter to the US Securities and Exchange Commission, Barington Capital Group and Clinton Group wrote that, with the exception of third-generation William Dillard III, "each of the other members of the Dillard family is overpaid and under-qualified for the positions they hold and can be readily replaced with more talented retailers."
 
The spat began in September when the hedge funds, who own 5.7% of the company's class A shares, wrote to the Dillard's board recommending that a special committee of independent directors be formed to consider the repurchase of all outstanding shares of Class B common stock.
 
However, the family, led by CEO William Dillard II, told the board that it has "no intention at this time of selling the class B shares which it owns, regardless of the price that may be offered."
 
The activist investors have now decided to force the matter by calling on the company's class A shareholders to immediately begin searching for replacements. Both Barington and Capital Group base their criticisms of the family around the company's performance over the past 10 years, which they describe as "atrocious".
 
"On Mr Dillard's watch, Dillard's has not posted an increase in annual comparable store sales since 1999 and lags behind its peers on virtually every retailing metric," said the letter, citing the company's removal from the S&P 500 Index as a result of its decreased market capitalisation.
 
The company, which specialises in fashion apparel and home furnishings and traces its roots back to 1938, has annual revenues of $7.7 billion and operates 330 department stores in 29 states.
 
William Dillard II runs the company along with brothers Alex and Michael and his sister, Drue. In addition, his sister, Denise Mahaffy, and son, William Dillard III, are also employed. Over the past 10 years, these members of the Dillard family have received over $130 million in total compensation.
 
The company and the family have yet to issue a formal response.
 
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