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Monday, July 19, 2010

Bloch to Leave H&R Block due to Disagreements

Kansas City Biz Journal

Thomas Bloch, son of H&R Block Inc. co-founder Henry Bloch, will not seek re-election as a director, citing concerns about the direction of the company.

Thomas Bloch has been a director since 2000. Before that, he had a 19-year career at H&R Block (NYSE: HRB), culminating in a term as CEO from 1992 to 1995. He served as president of the company from 1988 to 1995.

His term ends at H&R Block's annual shareholder meeting, which typically takes place in September.

Bloch cited several specific concerns he has with the direction of the Kansas City-based tax preparer.

First, he opposed the $2 billion stock buyback program that was authorized in 2008, saying it was ill-timed. He said the company repurchased shares significantly above their current price, which now reflects H&R Block’s status as one of the worst-performing stocks in the S&P 500 this year.

He said he also opposed the financial plan for the fiscal year that ended April 30, which he deemed to be “overly optimistic.”

Third, Bloch said he opposed the re-election of Richard Breeden as chairman last year.

“The leadership he demonstrated early on in hastening the company’s exit from the sub-prime mortgage and brokerage business was commendable,” Bloch wrote in a letter to the board. “More recently, however, Richard and I have had differences of opinion on a number of fundamental issues that, I believe, could affect the company’s long-term future.”

Bloch said he is concerned that, as the company’s stock price declines, the board will bow to pressure from short-term-oriented shareholders and put the long-term shareholder value at greater risk.

“Since I stepped down as CEO 15 years ago and especially since rejoining the board 10 years ago, no issue has raised my ire more than the pricing strategy employed in our core business,” Bloch stated. “Clearly, if our average charge had increased consistent with inflation since 1996, it would be significantly less than its current level. Today, the ability to present a compelling value proposition represents one of the most serious impediments to our tax offices’ long-term success, in my opinion.”

Bloch also expressed concern that the compensation package for new H&R Block CEO Alan Bennett is overly generous and seriously flawed with respect to its incentives. Bennett will receive a guaranteed $2.55 million in his first year and was given an option to purchase 1 million shares at $14.37 each.

Bloch said the decision not to stand for re-election was not easy.

“My wish is that (my father) will have an opportunity to see the company he built over several decades return to greatness,” Bloch wrote. “I have an enormous respect for him, our dedicated employees, and our franchisees. I hope they understand how painful it was for me to arrive at this decision. More importantly, I hope that my decision will serve as a catalyst for positive change.”

The H&R Block board in a statement thanked Bloch for his service.