H&R Block chairman Richard Breeden plans to step down on April 18.
Breeden will resign at the end of tax season as both chairman and director of the tax prep giant, the company announced late Thursday. Breeden is a former chairman of the Securities and Exchange Commission who led a contentious proxy battle in 2007 to gain a seat on the board and the chairmanship later that year (see Block CEO Resigns).
Breeden has led the board at Block since November 2007 after he won more than 85 percent in a proxy contest through which he sought to refocus the company on its core tax business. Block has since shed its money-losing Option One mortgage unit and gone through a series of CEOs.
“At the outset we wanted to extricate the company from risky financial businesses, restore financial stability, renew the leadership team and reignite growth in the tax business" Breeden said in a statement. "After nearly four years of work, the tax business is surging, the company's balance sheet is vastly stronger than when we began, we are out of the mortgage and securities businesses and there is an effective senior management team running each area of the business. I feel truly confident in saying 'Mission Accomplished.' This is now a vastly stronger company.”
The company has taken a hit from the late start of tax season after the IRS was forced to delay some forms because of last December’s tax cut extension law in Washington.
However, Breeden noted the company has reported increases of 30 percent in online tax clients, 6 percent in total tax returns and 3.2 percent in retail tax clients in the current tax season through Feb. 28, 2011.
"Richard Breeden has shown great strength and resolve during the most difficult and tumultuous period in the history of H&R Block,” said Block’s current CEO Alan Bennett in a statement. “In the darkest days of the national financial crisis, when H&R Block was facing severe liquidity issues, Richard stood behind the company and gave it vital financial assistance. Throughout his tenure as chairman, he has shown leadership, wide-ranging business experience, and faith in the future of H&R Block"
Breeden was elected to the H&R Block board at the company's annual meeting in September 2007. The former SEC chairman’s hedge fund held roughly 2 percent of Block shares when he fought for a seat on the board in June. Block chairman and CEO Mark Ernst resigned in November amid mounting losses in the company’s mortgage business, and Breeden took over as chairman.
Almost immediately upon his election as chairman, Breeden led the board in a proxy campaign. Subprime mortgage lending was halted almost immediately, and the company's mortgage servicing and securities brokerage businesses were sold promptly. The company used approximately $1.4 billion in proceeds from these transactions and internal cash flow to pay off debt, to reinvest in the core retail tax business and to expand the company's growing online tax business.
During 2007-2008, Breeden helped the company navigate a series of financial issues, including refinancing $500 million in bridge loans originally incurred to finance mortgage lending, issuing new medium term debt and obtaining waivers or term revisions under the company's committed lines of bank credit. In October 2008, Breeden Capital Management purchased $50 million of newly issued common shares as part of a $145 million equity offering that bolstered the company's net worth and avoided a potential covenant default in the company's liquidity facilities.
This action was pivotal in giving the company the resources to withstand the credit collapse that struck the global financial market in the fall of 2008, and the time to use future cash flow to restore its balance sheet.
Early in his tenure as chairman, Breeden was instrumental in recruiting Alan Bennett to join the company as interim CEO. Block named former McDonald’s executive Russ Smyth as CEO in July 2008, but he lasted only two years. Bennett assumed the position of president and CEO in July 2010.
"In his two terms as CEO, Alan Bennett has been masterful in restoring pride and enthusiasm, while also restructuring management and eliminating layers of unnecessary cost,” said Breeden. “He has built a strong senior management team that is executing well against critical objectives in each of our businesses. This year's early season client growth and market share gains in both retail and digital tax show what a solid foundation Alan has built for future success.”
In addition to simplifying the corporate structure and refocusing on the company's core businesses, during Breeden's tenure as chairman the board implemented a series of measures to enhance the company's corporate governance for the future.
Those steps included separating the position of chairman from that of president and CEO as requested in a nonbinding shareholder resolution that was adopted in 2007; amending the company's articles of incorporation to prohibit change in the separation of chairman and CEO without a prior vote of shareholders; de-staggering the board of directors; adopting majority voting instead of supermajority requirements in numerous areas; eliminating the company's poison pill; and adopting term limits for directors.
The company also committed to an annual "say on pay" vote of shareholders on its compensation practices well before the adoption of similar requirements in the Dodd-Frank legislation; and eliminated the practice of making equity awards in excess of the number of shares issuable under shareholder approved plans, and overhauling equity compensation and severance plans to align management interests more closely with those of shareholders.
Breeden remains chairman of Breeden Capital Management, which currently has more than $1.4 billion in assets under management invested in the equity of 30 portfolio companies in North America and Europe. He is a graduate of Stanford University and the Harvard Law School, and he has served on more than a dozen corporate boards in both the United States and Europe.
He served as a senior advisor in the White House under Presidents Ronald Reagan and George H.W. Bush (41), where among other things he was a principal architect of the restructuring of the U.S. savings and loan industry and creation of the Resolution Trust Corporation. He served as chairman of the U.S. Securities and Exchange Commission from 1989-1993, where he expanded transparency and shareholder rights in corporate governance. Breeden previously served as corporate monitor of WorldCom/MCI, Inc. and the accounting firm KPMG, LLP.
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