Attention, Kmart Stockholders: Victory

Kmart ceo Joseph Antonini couldn't believe his eyes when shareholders nixed his restructuring plan at the annual meeting in June. Antonini insisted that he lost only because many shareholders abstained. By Aug. 17, though, a chastened Antonini delivered exactly what dissidents wanted: a spin-off of three specialty retailers--office supply, books, sporting goods--into independent units.

Credit his conversion to behind-the-scenes talks between shareholders and John Pound, a governance expert at Harvard University whom Antonini hired in July. "I wanted a second opinion, to make sure that I was getting the message straight," Antonini says. Pound, who has acted as an intermediary for a few other companies, interviewed about 20 institutions that together hold more than 15% of Kmart's stock. He found no dissent: Everyone wanted separate management and boards for the units.

Antonini now says that Kmart management will talk more often with share-

holders. How come? "The environment has changed, for the good. You're seeing more interaction between shareholders and management and boards. The business environment is tough, and we all have to work together to make money." Besides, Antonini isn't off the hook. Shareholders still want better performance; they've just given him more time to produce it.

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