PulteGroup CEO to retire under pressure from company founder

PulteGroup, Inc.

3350 Peachtree Road NE, Suite 150

Atlanta, Georgia 30326

Ladies and Gentlemen:

As the founder, former Chairman and CEO, and largest shareholder of PulteGroup, Inc., I am writing in light of the company’s public announcements this morning to reiterate my extreme disappointment in the leadership of CEO Richard Dugas and the lack of performance of PulteGroup under his watch.

I told Richard early on in his tenure that I intended to allow him to own and drive PulteGroup’s operations and strategy and not to insert myself into the day-to-day operations of the company. Unfortunately, Richard Dugas’ lack of performance and repeated bad decision-making has led me to conclude that the company needs new leadership.

Accordingly, I recently approached Richard Dugas and the Board and conveyed my disappointment in Richard Dugas’ leadership and the need for an immediate change. Based on ensuing discussions I had with members of the Board, I understood that the Board was seriously considering my concerns, and I hoped that they would take steps to implement a near-term change for the benefit of PulteGroup shareholders.

This morning, however, I learned that PulteGroup announced that Richard Dugas had informed the Board of his intention to retire over a year from now. This falls far short of the short-term leadership change that PulteGroup shareholders and PulteGroup employees need.

In addition, the company also disclosed this morning in its definitive proxy statement for the 2016 annual shareholder meeting that the Board had determined not to nominate James Grosfeld to continue as a director of PulteGroup “for a number of reasons, including as a result of differing points of view between Mr. Grosfeld and the other independent directors over succession planning and other business strategy matters.” The company had previously disclosed in its preliminary proxy statement for the 2016 annual shareholder meeting that Mr. Grosfeld was a nominee. The Board’s decision not to renominate Mr. Grosfeld reflects an attempt to stifle any differing views on management and business strategy matters, which is contrary to good corporate governance. Jim Grosfeld is highly regarded as one of the best homebuilding executives and homebuilding financial experts in the history of the U.S. homebuilding industry.

Specific examples of the leadership failures of Richard Dugas and the inadequate performance of PulteGroup under his watch include, but are not limited to, the following:

1. Since Richard Dugas was appointed CEO almost 13 years ago, PulteGroup’s stock price has not appreciated significantly, even when many peers have performed strongly since the Great Recession.

2. Richard Dugas laid off key and irreplaceable homebuilding talent that have left the Company.

3. After many years of losses at PulteGroup, Richard Dugas moved the Company’s headquarters from suburban Detroit to Atlanta, which cost the shareholders tens of millions of dollars with no apparent benefit to shareholders. It is important to note that PulteGroup had become the largest homebuilder in the United States while headquartered in Michigan.

The shareholders and employees of PulteGroup deserve a strong and growing company, especially in today’s highly competitive and growing environment. The necessary management changes are long overdue, and the succession plan announced by the Board only serves to further delay these changes to the detriment of shareholders. PulteGroup has great assets and many loyal and talented employees, whose potential is waiting to be realized with effective leadership. This is not about going backward; this is about going forward with the right CEO and the right strategies.

Accordingly, I am asking the Board to significantly accelerate the announced succession plan for Richard Dugas, and recruit an experienced and seasoned homebuilding operator as CEO, one who truly understands the homebuilding business.

I stand ready to assist in identifying such a person and enabling a bright future for PulteGroup and my fellow shareholders.

Bill Pulte

Founder

Pulte Homes (PHM:NYSE)

Atlanta homebuilder PulteGroup Inc. said Monday that its CEO will retire next year in an accelerated turnover plan being pushed by the company’s founder.

Richard Dugas Jr., 50, who has taken on a number of high-profile civic roles since the company moved its headquarters to Atlanta from suburban Detroit in 2014, plans to retire at the company's annual shareholders meeting in May 2017.

The move to Atlanta caused a rift between Dugas and Pulte family, including company founder Bill Pulte and his grandson, Billy Pulte. Pulte, who was 18 years old when he started the company in Michigan in 1950, is the homebuilder’s largest shareholder, with almost 9 percent of its shares.

With a 60 year-plus history in Michigan when PulteGroup pulled up roots and moved to Atlanta, “people are going to try to identify the person responsible for that,” said one person familiar with the matter.

Pulte, the founder, confirmed in a letter Monday to the company's board of directors that Dugas' decision to move the company to Atlanta is one of his concerns. But he also expressed his "extreme disappointment" in Dugas' running of the company and "the lack of performance of PulteGroup under his watch."

“After many years of losses at PulteGroup, Richard Dugas moved the company’s headquarters from suburban Detroit to Atlanta, which cost the shareholders tens of millions of dollars with no apparent benefit to shareholders,” said Pulte. He said the company “ had become the largest homebuilder in the United States while headquartered in Michigan.”

Pulte also criticized the company’s decision to push out a director, Jim Grosfeld, that he had gotten the company to add to the board of directors in December.

The board is trying to “stifle any differing views on management and business strategy matters,” said Pulte.

The homebuilder announced its plans to move its headquarters to Atlanta from Michigan in May 2013 and completed the move the following year. At the time, the company said it was attracted to Atlanta by the promise of a renewed homebuilding market in metro Atlanta and the Southeast.

The company moved or hired about 350 executives and top-level support staff to the Capital City Plaza tower in Buckhead, overlooking Ga. 400 and the Buckhead MARTA station.

In announcing Dugas’ decision to step aside, PulteGroup’s board of directors praised the executive’s leadership and took the unusual step of publicly pointing to the founding family’s role in developments.

"Mr. Dugas' decision to retire is due in part to the actions of Bill Pulte, who founded the Company in 1950, Mr. Pulte's grandson, and Jim Grosfeld, who was appointed to the Board in December at the behest of Mr. Pulte," the company said in a press release.

“These individuals recently demanded an immediate CEO change and a different direction for the Company,” the firm added. “In an effort to avoid a contested public battle that would not be in the interests of shareholders, Mr. Dugas offered to accelerate and make public the Board’s succession plan, prompting today’s announcement.”

The stock was trading near the close at $17.21, down about 6.6 percent from Monday’s open and down about 25 percent from its highest point in the past 12 months.

Monday, PulteGroup’s board said Dugas’ “outstanding leadership … positioned PulteGroup to succeed in the future.”

The company said its pre-tax profits have increased $1.1 billion since Dugas rolled out his “Value Creation” strategy in 2011, and shareholders have seen a 160 percent return in the same period.

Dugas, after spearheading the move from Detroit to Atlanta, quickly became ingrained in Atlanta's civic and business scene. He took a board role with the Metro Atlanta Chamber and was one of the city's roster of Fortune 500 executives who played a role in convincing Mercedes-Benz to move their U.S. headquarters to metro Atlanta from New Jersey.

He also is the founding chairman of the Westside Future Fund, a non-profit made up of top Atlanta civic leaders that has been tasked with aiding redevelopment of neighborhoods around the new Falcons stadium. Dugas is expected to remain its chairman.

Dugas was just 38 when he took over as Pulte’s CEO in 2003. Before becoming CEO of the company, Dugas previously served as the Atlanta market leader Pulte. he has worked at Pulte since 1994, and was named its chairman in 2009.

Pulte’s board of directors said it has created a committee of its independent directors to conduct a search for Dugas’ successor.