The ‘Carl Icahn Strategy’ of Purging Employees Leads a Xerox Executive to Sue Over His Ouster

This isn't the first time former employees have sued Carl Icahn for severance after being forced out during a takeover.

Carl Icahn on stage at 2015 New York Times Dealbook Conference.
Activist investor Carl Icahn in 2015. (Photo by Neilson Barnard/Getty Images for New York Times)

A severance lawsuit brought by Robert Zapfel, a former Xerox executive, claims he was strategically forced out of the company by activist investor Carl Icahn.

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Icahn invests in undervalued or mismanaged companies with the goal of securing enough board seats to eventually take a controlling position and enact changes to increase profits. He currently has an estimated net worth of $24.7 billion.

Zapfel’s complaint, filed on Feb. 1 in a New York state court, refers to Icahn’s behavior as the “Icahn Strategy.” Icahn began buying Xerox shares in 2015, one year after Zapfel was hired as president of Xerox Services and CEO of Xerox Business Services, subdivisions of the company. As Icahn began securing board seats and publicizing his desire for a change in leadership, Zapfel was forced to resign as CEO and his business responsibilities were reduced by a third, according to court records. By beginning of 2017, Zapfel was terminated alongside a number of other Xerox executives.

Zapfel, who is seeking $15 million, claims he is owed $12.7 million under his severance agreement with Xerox due to the connection between his termination and a change in control at the company. Xerox declined requests for comments and said the company doesn’t discuss pending litigation.

Icahn’s “initial and increased ownership in Xerox, threatened and instituted ‘proxy wars,’ forced reorganization, termination of senior executives like Mr. Zapfel, gutting of the Xerox Board and naming of replacement directors and Xerox CEOS, are methods employed by Mr. Icahn over his long corporate raider career,” reads the complaint.

Icahn remains the largest Xerox shareholder, owning 19 percent of the company’s shares with a value of $573 million. Xerox’s revenue for 2022 was $7.1 billion, a 1 percent increase from the year before.

Decades of layoffs 

Icahn, 86, has long been the source of company shakeups during his time as an activist investor. In his first highly-publicized takeover in 1985, he became a prominent stakeholder in Trans World Airlines before dismissing major executives and selling off most of the company’s profitable assets. “We’ve got an overprivileged corporate aristocracy in this country, and shaking it up can only help the economy,” said Icahn in an interview with the Los Angeles Times that year. “If you want to be loved in this business, buy a dog.”

Over the years, Icahn has either cut or attempted to oust directors at companies like Time Warner, Occidental, Cheniere and Yahoo. His investments have resulted in the loss of more than 35,000 jobs and eliminated pension or health benefits for more than 126,000 families, according to a 2016 report from Hedge Clippers and Take on Wall Street, activist groups focused on the finance industry.

In 2008, Icahn heavily criticized Yahoo’s generous severance plan, which he claimed purposefully blocked the company’s potential takeover by Microsoft. Although the company’s severance policy was later amended, the Microsoft acquisition never came to fruition.

In 2020, severance issues again came to the forefront when two former Navistar executives sued the truck manufacturer in Illinois federal court after Icahn bought up Navistar stocks. Donald Sharp and Regis Luther claim they were terminated due to Icahn’s push for company turnover, and alleged they were entitled to severance because of Navistar’s change in control. The case was later dismissed.

Icahn did not respond to requests for comment.

The ‘Carl Icahn Strategy’ of Purging Employees Leads a Xerox Executive to Sue Over His Ouster