Thomas M. Bloch, son of H&R Block founder Henry Bloch, submitted a letter to Block’s board citing a “disagreement over the direction of the company” as the reason why he won’t stand for re-election as a director.

Bloch has reportedly been approached by Liberty Tax Service CEO John Hewitt, founder of Jackson Hewitt Tax Service, about bidding for H&R Block, according to Dow Jones Newswires.

Block CEO Russ Smyth resigned earlier this month after the tax prep giant reported a decline in tax season revenues this year (see H&R Block CEO Steps Down). Block chairman Richard C. Breeden named board member Alan M. Bennett, who served as interim CEO from 2007 to 2008, to succeed Smyth.

In a letter dated July 14, Bloch cited three examples of differences that he has had with the board in recent years, including a $2 billion stock buyback authorization in 2008 that he considered “ill-timed,” the company’s fiscal 2010 financial plan which he deemed “overly optimistic,” and the re-election of Breeden as chairman last year. Bloch, a former CEO of the company, said he would not stand for re-election as a member of the board when his term ends on Sept. 30. He is currently president of the University Academy, an urban college prep charter school that he co-founded in Kansas City, Mo., where H&R Block is headquartered.


“Richard's hard-fought proxy contest in 2007 was enormously successful, and, in my view, for good reason,” he wrote. “I supported his election as chairman after he joined the board. The leadership he demonstrated early on in hastening the company's exit from the sub-prime mortgage and brokerage businesses was commendable. More recently, however, Richard and I have had differences of opinion on a number of fundamental issues that, I believe, could affect the company's long-term future.”

“As Block's share price has declined, I have become increasingly concerned that the board will bow to the intense pressure from short-term oriented shareholders, putting long-term shareholder value at greater risk,” he added. “This is not a new concern. Since I stepped down as CEO 15 years ago and especially since rejoining the board 10 years ago, no issue has raised my ire more than the pricing strategy employed in our core business. Clearly, if our average charge had increased consistent with inflation since 1996, it would be significantly less than its current level. Today, the ability to present a compelling value proposition represents one of the most serious impediments to our tax offices' long-term success, in my opinion. Similarly, our weakened competitiveness in the growing do-it-yourself online tax market is another critically important issue. I believe that these and other important problems can be ameliorated with a renewed focus on long-term shareholder value.”

“Our new CEO, Alan Bennett, is of course not new to the organization or the board. I hope Alan, as permanent CEO, will make a commitment to live in Kansas City, where the company is headquartered, instead of commuting from his Connecticut or Florida home,” he added. “Furthermore, I hope he will demonstrate a genuine commitment to long-term value creation, even though his compensation package, I believe, may prove to be seriously flawed with respect to its incentive components. In my opinion, the package is also overly generous.”

“In recent years my father Henry Bloch, who will turn 88 this month, has witnessed the company suffer a number of setbacks that could have likely been avoided or minimized,” he noted. “For example, he has watched our customer base contract by a staggering amount—a loss approaching two million customers in the last two years. My wish is that he will have an opportunity to see the company he built over several decades return to greatness. I have an enormous respect for him, our dedicated employees, and our franchisees. I hope they understand how painful it was for me to arrive at this decision. More importantly, I hope that my decision will serve as a catalyst for positive change.”

Hewitt told Dow Jones Newswires on Monday that he had telephoned Bloch twice to assess his interest in joining with Hewitt to merge Liberty Tax Service, the third largest tax service behind Block and Jackson Hewitt, with H&R Block, but Bloch had not yet returned his phone calls. He noted that he had twice before proposed a merger before founding Liberty. He wants to involve both Henry Bloch and his own father Daniel Hewitt in a merged company.

“With no Blochs being involved in Block and no Hewitts at Jackson Hewitt, I’d be interested in putting the two names together,” he said. “I think it would be of great appeal if Henry Bloch and my dad and I and Tom stood together.”

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