Updated to include new Vine videos below.

NEW YORK (TheStreet) -- An activist investor such as Carl Icahn doesn't magically appear on the doorsteps of publicly traded companies for no good reason. For an Icahn, a Nelson Peltz, and a Bill Ackman to get involved, a company's management team and board must really be failing shareholders via misguided operating tactics. In turn, those failures show up in the stock price, masking a business that may be worth more on a public market if new ideas are implemented from the outside.

Family Dollar (FDO) is in a state of operational disarray, which was created by a poorly situated board and a founder's son as CEO who has orchestrated the company's existing mess. Yet the company plays a critical role in the communities it serves in bringing low-priced food closer to consumers than a Walmart (WMT) or Target (TGT).

Here is what Icahn sees in Family Dollar, and why his case against the company is very strong.

The board is mostly made up of present or retired consultants with little retail experience. These board members are generally long-tenured. A retailer having a portfolio of more than 8,100 stores must have former retail executives on the board to hold the executive team, led by the founder's son, accountable. If Family Dollar has to pay more to attain that board talent, so be it.

Family Dollar is badly underperforming rivals Dollar General (DG) and Dollar Tree (DLTR) in most operating metrics, acutely operating margins, ROE, and sales per square foot. The reasons for that lagging nature are easily found in the stores (see the Vine below), which continue to be overstuffed with so much inventory as to serve as an anchor over the profit lines.

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