The Top 10 Business Stories of 2008

by Arkansas Business Staff  on Monday, Dec. 22, 2008 12:00 am  

John Glasgow, CFO of CDI Contractors, disappeared on Jan. 28. Dillard's owned a half-interest in CDI and was embroiled in a bookkeeping dispute with CDI management when Glasgow, of Little Rock, vanished.

Dillard's owned a half-interest in CDI and was embroiled in a bookkeeping dispute with the CDI management when Glasgow vanished on Jan. 28. A few weeks later, Dillard's made a modest restatement of earnings – $7.1 million over the course of several years – and cited an "error" in accounting by CDI.

On Aug. 28, Dillard's bought the remaining half of CDI from the family of the late Bill Clark for $9.8 million. Glasgow is still missing.

Throughout the year, Dillard's was dogged by James Mitarotonda, chairman and CEO of Barington Capital Group LP, and George Hall, chairman and CEO of the Clinton Group Inc. of New York – activist shareholders who had begun their assault in the summer of 2007.

In January, Mitarotonda sent Dillard's directors a letter blasting the management and said he was "committed to taking all actions necessary to enhance shareholder value," which was taken as a sign that a proxy fight was looming.

To avoid a proxy fight, Dillard's in April agreed to allow the hedge fund to pick the four directors who would represent the Class A shareholders. The Dillard family, though, still controls the company through the dual-stock arrangement that allows their Class B shares to elect eight of the 12 directors.

As the country sank deeper into recession, Dillard's sales slid further. Same-store sales, a key indicator of a retailer's health, were down in 10 of the first 11 months of the year. For the second quarter that ended Aug. 2, Dillard's reported a loss of $38.3 million on sales of $1.6 billion. In the third quarter, Dillard's reported a loss of $56 million on sales of $1.63 billion.

Sales weren't the only numbers going south. Dillard's stock price, which had topped $40 in May 2007, started the year above $18. By Oct. 21, when it was dropped from the Standard & Poor's 500 Index, Dillard's stock was barely above $6, and it continued to slide until hitting a low of $2.50 on Nov. 21.

On Oct. 27, Mitarotonda and Hall lobbied the three independent Class B directors to remove Dillard family members from management positions. The letter included a veiled threat to sue the directors for breach of fiduciary duty if the management was allowed to remain in place. 

If Mitarotonda and Hall could combine the three independent directors with the four votes that they already had, William Dillard II could be removed as CEO. But the three Class B directors announced their loyalty to the Dillard family.

Dillard's has tried to satisfy critics by closing 21 underperforming stores in 2008. It also slashed 500 of its approximately 60,000 jobs in November.

The company also issued a statement that said, "We believe the best way to serve the long-term interest of all shareholders is to concentrate our efforts on running our business conservatively and on navigating the near-term economic uncertainty while focusing on the important upcoming holiday selling season."

4.) ANB Financial Fails
In the second half of 2008, the arrival of Friday meant there was a better than even chance of a bank failure somewhere in the United States – sometimes two or three on the same Friday. Twenty-five banks had failed by mid-December, 21 since mid-year.



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