By John Jannarone of CorpGov
Glass Lewis and ISS both recommended shareholders vote for all three directors proposed by activist Cruiser Capital at American Vanguard Corp.’s (NYSE: AVD) upcoming annual meeting, with the proxy advisors citing major corporate governance concerns at the chemical company.
The proxy advisors, who influence a large part of most shareholder bases, cited many of the same issues highlighted in the CorpGov article “Corporate Governance Falls Behind the Times at American Vanguard” published last week. The concerns included “very weak succession planning” along with an “inability to execute” that likely contributed to a poor share price performance over the last several years.
In particular, ISS zeroed in on the same policy discussed in the CorpGov article: The board’s refusal to accept mandatory resignations of multiple directors after they reach the age of 75. “It is challenging to not interpret this policy as a means for the board to have its cake and eat it,” ISS wrote.
Before Glass Lewis reached its decision, CorpGov had highlighted the proxy advisor’s own policy discouraging the practice of rejecting aging director nominations. As may have been anticipated, Glass Lewis frowned on American Vanguard’s practice, stating “we would not suggest the board has gone particularly far out of its way to embrace dynamism or prepare adequately for change. Nowhere is this more evident than with respect to the board’s age-based retirement non-policy, which, as noted by [Cruiser], has essentially compelled Messrs. Erlich and Ingulli to repeatedly submit resignations, the subsequent acceptance of which has thereafter been subject to a ‘close evaluation’ which has consistently facilitated their continued service. As a result of this unnecessarily confusing framework and what we consider a very weak approach to refreshment, AVD has effectively onboarded just two new directors over nearly a decade, while also signaling that Messrs. Erlich and Ingulli may, in lieu of a clearly communicated process designed to timely attract credible new directors, continue to serve indefinitely.”
Additionally, both advisors reached a similar conclusion to CorpGov regarding the company’s argument that the Cruiser directors weren’t enthusiastic about joining the board. CorpGov pointed out that the argument was at odds with the fact that Cruiser’s nominees – former Union Carbide CEO Patrick Gottschalk, former Hemlock Semiconductor CEO Mark Bassett and Cruiser Co-Founder Keith Rosenbloom – all own shares in the company, have agreed to run in the proxy contest, and have extensive industry experience.
Echoing CorpGov’s analysis, ISS wrote “the contention that certain of the dissident nominees do not have the desire to serve is bizarre. After all, these persons have agreed to be nominated, have independently invested in AVD, and went through the process of being interviewed by the sitting directors.”
For its part, Glass Lewis stated “As to the claim that [Cruiser] nominees Basset and Gottschalk effectively do not want to serve, we believe the board’s stance barely rises to the level of distraction. Both Messrs. Basset and Gottschalk have formally agreed to serve as directors, have actively participated in the current campaign and related engagements and have reportedly invested a considerable amount of personal capital in AVD’s shares. We see no credible cause for investors to share the board’s perspective in this respect.”
The annual meeting for shareholders to vote on the directors is scheduled for June 1.
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