Shareholders flood Payless with questions at meeting

KANSAS CITY, Mo. -- Sparks didn't fly, but feet were held to the fire last week at Payless Cashways' annual meeting.

Unhappy over the debt-burdened company's stock price -- driven down from a high above $19 in 1994 to hovering at about $2 now -- more than two dozen shareholders peppered management and directors with pointed questions and observations. Some were supportive; others weren't.

Payless Chairman David Stanley began the business part of the meeting with a surprise announcement: Outside director Gary Rose was resigning his board seat after the meeting. That opened the door for a group of dissident shareholders led by Marc Kozberg of Minneapolis to get one of its own, Gary S. Kohler, on the board. Kohler is vice president of the Okabena Investment Services Inc., the investment vehicle of the Dayton family of Dayton- Hudson retailing fame. Kozberg's group said it thinks the company has a chance at long- term survival, but only if changes are made. The group wants increased sales, a cleaned-up balance sheet, a higher stock price and active courting of analysts on Wall Street. "Wall Street treats this company like it's going to file bankruptcy within the hour," Kozberg said in one of several questions and comments at the meeting. "What are you going to do about that?...When is this company going to make significant changes?" Earlier, management gave a review of the company's problems, strategies and finances, delivered by Stanley, president Susan Stanton and chief financial officer Steve Lightstone. Stanley then opened the floor for questions. And unlike in years past, where shareholders were uncomfortably mute, many hastened to get to a microphone. Questions ranged from big to small issues, including: Why don't the directors own more stock? "Directors own what they own and make their own personal investment decisions," Stanley said. Why don't Stanley, Stanton and other top management take a pay cut? Top management salaries are determined by the board. Why doesn't the company put a rank-and-file employee on the board? Stanley said very little of what's been written about corporate governance says that's beneficial. What will the company and the board do to get new equity injected into the company? The board and management continue to examine that issue, Stanley said. Why does the store in Lawrence sell bath towels? Selling bath towels was a limited experiment in a handful of stores and is being phased out, Stanton explained. Is the store at 135th Street and Metcalf Avenue doing as well as expected? Yes, Stanton said. Would newly elected director Kohler consider deferring his director's compensation, a minimum of $25,000, for one year? "I consider it fairly nominal compensation for the job. It's adequate, but there is no desire whatsoever to forgo it," he said. In a twist, a reporter from The Kansas City Star was nominated for the seat Kohler later won. The nomination was declined. Finally, Stanley said the company would be here next year and many years after that. "This company is not going away," he asserted. But after the meeting Kozberg said that unless progress could be shown, he would ponder more action. "I will consider and explore calling a special shareholders meeting to let the shareholders who own the company have a chance to say what changes should be made," he said. Near the end of the meeting, the company announced that four directors were re-elected, including inside director Stanton and three outside directors, Harold Cohen, Scott G. Fossel and George Latimer.

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