As co-founder and principal of San Diego-based activist investment firm Relational Investors LLC, Ralph Whitworth has the delicate job of informing chief executives at some of the world's largest companies that, to varying degrees, their management is flawed.
In 2007, Whitworth and his firm contributed to the ouster of the CEOs at Home Depot Inc. (NYSE: HD), the country's second largest retailer, and cell phone network operator Sprint Nextel Corp. (NYSE: S).
Three weeks after Whitworth sent a letter to the board of directors at Home Depot raising questions about the company's strategic direction and the leadership of its CEO Bob Nardelli, Nardelli abruptly resigned. Although Home Depot denied that Nardelli's resignation had anything to do with Relational's criticisms, the firm, which at the time owned a 0.6 percent stake in Home Depot, was granted a seat on the board of directors shortly afterward. Unfortunately, share values in Home Depot have continued to deteriorate in the following months. As of mid-November, Home Depot's stock price had fallen approximately 30 percent since Nardelli's resignation.
Relational made national headlines again in April when it was reported that the firm had accumulated a $500 million stake in Sprint Nextel and had begun pushing for cuts in capital expenditures as well as a potential sale of its fiber-optic networking and long-distance operations. In October, after reportedly doubling his firm's stake in Sprint Nextel to about 1.9 percent, Whitworth stepped up pressure on the company to replace its CEO and Chairman Gary Foresee, who had presided over the troubled $35 billion acquisition of Nextel in 2005. A week later, Foresee resigned after it was revealed that the Sprint Nextel board had begun a search for his replacement.
Whitworth, a Georgetown University law graduate, developed his investment style while working at Mesa LP in the 1980s under legendary investor T. Boone Pickens. Primarily an energy company, Mesa LP became increasingly involved in value investing in the 1980s, identifying undervalued companies and acquiring stakes or companies outright, with the intent of selling after a time at a profit.
Whitworth founded Relational Investors in 1996, along with David Batchelder, who served as president and chief operating officer at Mesa during Whitworth's tenure there. Batchelder headed Mesa's investments, acquisitions and financing operations.
Relational Investors now manages $7.1 billion in capital belonging to strictly institutional investors including the California Public Employees' Retirement System and California State Teachers' Retirement System.