Pier 1 Imports Inc (NYSE:PIR) and one of its largest institutional investors could be headed for a serious clash over how the company should be run. In a letter last week, Alden Global Capital accused Pier’s board led by Chairman Terry London of incompetence and recommended that the board be disbanded and a new one be reconstituted. But Pier said the shakeup proposals Alden is making will be disruptive and potentially hurt its business during the important holiday season.

Furthermore, Pier said the directors whom Alden wants replaced were re-elected with a strong approval of 98% of shareholder votes only a few months ago. Nevertheless, Pier seemed to offer an olive branch to Alden in its rebuttal, saying it was ready to work with Alden and other shareholders.

A range of accusations

Among the bones that Alden has to pick with Pier is the claim that the board has performed poorly in capital allocation, thus destroying nearly $500 million of shareholder value through stock repurchase. With that, Alden says that the existing board can no longer be trusted to either protect or create shareholder value.

As shareholder value got destroyed, Alden said Pier’s board chairman London has fetched more than $1 million in board fees. Alden added that under London’s watch, Pier’s stock has plunged nearly 75%.

Alden’s attacks were also directed at Pier’s CEO Alex Smith, whom it accused of failing to improve earnings. Although Pier’s revenues improved between 2013 and 2016, Alden said earnings have plummeted more than 45%.

Pier’s stock has also shrunk under Smith, Alden said, adding that while the stock fell, Smith has taken home more than $70 million in compensation. As if that were not enough, Smith is set to receive 741,000 shares of Pier as performance compensation when he leaves office, Alden said in its letter. But Alden says Smith didn’t achieve the performance target to qualify for the stock award.

A new board

Alden wants its president, Heath Freeman, and directors that it favors to sit on the new board of Pier to be formed. The firm has threatened a proxy fight if Pier didn’t heed its advice to shake up the existing board.

Earnings

Pier posted EPS loss of $0.05 for F2Q17, down from EPS profit of $0.04 for F2Q16. Revenue of $405.82 million for the latest quarter fell below the consensus estimate of $406.96 million.