George Zimmer plots a comeback at Men's Wearhouse

It could be war between the founder and the board as both sides stake out their positions. Wall Street senses a takeover battle.

By Jonathan Berr Jun 25, 2013 10:50AM
File photo of George Zimmer, founder and executive chairman of The Men's Wearhouse Inc., on May 1, 2012 (© Patrick Fallon/Bloomberg via Getty Images)George Zimmer, whose firing last week stunned investors, is plotting a comeback at Men's Wearhouse (MW), although it's unclear what steps he may take next to regain control over the company he founded in 1973.

Zimmer is said to be consulting his advisers, including legal counsel, but his options are limited. Zimmer's family owns a 4.7% stake in the retailer, and the former executive chairman himself holds 3.5%. That position isn't large enough to enable Zimmer to force the company to do his bidding. But the baritone pitchman may able to join forces with a larger partner such as a private equity player to buy the company. That's how how tech entrepreneur Michael Dell is planning to take Dell (DELL) private.

Not surprisingly, Wall Street senses a potential takeover battle. Shares of Men's Wearhouse, which has 1,143 stores, were up $1.97, or 5.6%, to $37.10 in early trading Tuesday.

The chain, which has been pummeled on social media since ousting Zimmer, also tried to explain the reasons for the abrupt dismissal. According to a company statement, Zimmer had difficulty releasing the reins of power and had been undermining the authority of CEO Doug Ewert. Zimmer also balked at the company's plans to sell its underperforming K&G stores and failed to persuade the board to sell the chain to a private equity investor.

"Mr. Zimmer expected veto power over significant corporate decisions," Men's Wearhouse said. "Among them was executive compensation despite the fact that we -- as required of a public company -- have an independent committee of the board that sets policy in this area."

Men's Wearhouse argued that Zimmer's plan to sell the company is risky because the strategy would require it to take on a huge amount of debt and would threaten the chain's culture that "is so important to all of us," the press release said.

The men's clothier said it didn't want to part ways with Zimmer and tried to accommodate him. But it said Zimmer wouldn't settle for "anything other than full control of the company," which the board couldn't accept. The company said that left the board with "no choice but to terminate him."

Zimmer, Men's Wearhouse's TV pitchman since 1985, was well-paid for someone who wasn't involved in the company's day-to-day management. His 2012 compensation was $1.09 million and included perks such as personal use of corporate aircraft. If Men's Wearhouse decides to keep using Zimmer and his famous tagline -- "You are going to like the way you look. I guarantee it" -- he's entitled to $250,000 now that he's no longer a Men's Wearhouse employee.

Jonathan Berr doesn't own shares of the listed stocks. Follow him on Twitter @jdberr.

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36Comments
Jun 25, 2013 12:01PM
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Always maintain a controlling interest in your own company.
Jun 25, 2013 1:06PM
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I see a terrible pattern of how companies are run into the ground and/or ruined because of over paid CEOs and board of directors. There seems to be an agenda among them that they infiltrate a good company and then begin to use it as their personal ATM and bank instead of actually running it in a prudent and efficient manner. The incentive to go public seems to be a ruse to get a founder to agree to certain things for the company and are usually offered a lot of compensation in exchange for giving up the control of the company. A profitable company is harder to manager than one that is stripped of it's value for the greed of a few head honchos. I also just read a new story on why Zimmer was fired. He was fired because he was AGAINST a proposal to increase the compensation packages of the board of directors and he was against selling of the K&G Fashion Superstore part of the business which the CEO, Ewert, wanted to also do. So he wasn't fired for doing any thing to harm the company. He was fired because the CEO and board of directors wanted more money and to justify getting that money they wanted to parcel out and sell parts of the company for the cash. He was fired for GREED of someone else. These are NOT good business models but seems to be the normal way of running things. Let's watch the Men's Wearhouse stock prices over the next few years and see if it still rises as much as it has over the last 2 years, 50%. Then let's compare that to all the compensation and golden parachute packages that they have now and how much they are worth in the next few years. But, the board of directors and CEO will pencil whip the numbers so they look good and sell that to the stock holders to justify anything they take from the company.
Jun 25, 2013 12:48PM
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The Founder and Executive Chairman should have veto power over a CEO (employee).  Go get em George!
Jun 25, 2013 12:46PM
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It sounds like they fired him. Because the compensation committee was packed. In favor of the under performing executives.
Jun 25, 2013 1:10PM
Jun 25, 2013 12:22PM
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A little over a million salary seems sort of low for the face of a major chain and founder.  I understand he has stock, but I figured he would have been in the 3-10M a year salary range.

Jun 25, 2013 1:21PM
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TO GEORGE, do it all over again and put the greedy bastards out of business, everyone who has has ever touched the MENSWEARHOUSE will leave them and go with you, I ,JR, GAURANTEE IT.
Jun 25, 2013 1:33PM
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George is the MENSWEARHOUSE not these buttheads.
Jun 25, 2013 1:12PM
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The Menswearhouse without George Zimmer is now worse than J.C. Penney. The board execs are are trying to drain the company to line thier own pockets. This is wrong and myself and everyone I know and can convince will never shop there again. I personally know George and I can gaurantee it that he would never go along with any of this no matter how much money they offered him. Yes, I am the one and only JR ex-manager of Mays Landing store.
Jun 25, 2013 12:20PM
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"Mr. Zimmer expected veto power over significant corporate decisions," Men's Wearhouse said. "Among them was executive compensation despite the fact that we -- as required of a public company -- have an independent committee of the board that sets policy in this area."
 
I wonder what "executive compensation" Mr. Zimmer was against...was he wanting "more" or trying to keep them from granting outrageous packages... I hope it's the latter.
Jun 25, 2013 3:26PM
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I have purchased all my suits at Men's Wearhouse for a number of years, and love their buy one, get one free.  They are superior than other men's clothing stores from service, to carrying a number of name brands, to even being able to get my suits pressed there.  Zimmer founded a good company and he is spot on in terms of executive compensation.  How much is enough??  I'm disappointed in Men's Wearhouse...
Jun 25, 2013 2:11PM
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" I guarantee it" -- he's entitled to $250,000 now that he's no longer a Men's Wearhouse employee."

 

Wow what a rip-off...

Jun 26, 2013 9:47AM
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THEY WILL LOSE CUSTOMERS!!!!!  AND THEY SHOULD!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Jun 25, 2013 4:57PM
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Looks like they just saved another 1.1million by firing George so that they can now use it to give themselves that increase they wanted.  Crazy they can fire him and still use his name and tag line only to pay him a smaller fee instead of his salary.   Crazy thing is this sounds like something our congress has done.  instead of compromising on the sequester now we have forced furloughs but congress still gets their full paycheck. 
Jun 27, 2013 12:19AM
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 If the general public knew even 1/2 of how good TMW (GEORGE) really is to their customers and employees, you would probably faint.  George worked for $1 during the WFC, and had all the executives take a  50% pay cut to help keep lay offs from happening (there were none BTW),  This was while Gap, Starbucks and other retailers were closing stores, TMW opened more! Thank you for an absolutely amazing place to work and shop.  Thank you George for everything you have done for us.   
Jun 26, 2013 2:41PM
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its Zimmer not Zimmerman bone head .
Jun 25, 2013 11:57AM
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I doubt he's suffering. Probably just upset he went public. He owned an excellent company too bad. 
Jun 25, 2013 12:23PM
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I'd say the Men's Wearhouse should be the last thing on his mind.  He first has to navigate through the whole Trayvon Martin trial, get exonerated, and then he can worry about controlling interest in this company.  Too much on the plate right now, George, focus on your defense.
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