WALL STREET JOURNAL.
Activist Investors Ramp Up, and Boardroom Rifts Ensue
could become more prevalent as activists court corporate directors
with pedigree to offer up as board nominees
Directors at ski-slope operator Vail Resorts forced out a fellow
board member when they discovered he had joined forces with an
activist investor. PHOTO: RICK BOWMER/ASSOCIATED PRESS
April 16, 2015 2:43 p.m. ET
As activist shareholders
increasingly become a fixture of corporate America, battle lines are
being drawn in the boardroom.
Take a recent dust-up on
the board of
Vail Resorts Inc.
Directors of the ski-slope
operator this month forced out fellow board member Richard Kincaid
after they discovered he had joined forces with activist investor
Jonathan Litt, according to people familiar with the matter and a
letter reviewed by The Wall Street Journal.
Mr. Kincaid and Mr. Litt
weren’t planning to push for changes at Vail. Rather, they were aiming
to take seats on the board of casino operator
MGM Resorts International.
The one link between the two companies:
They share the same lead independent director, Roland Hernandez.
Shortly after Mr. Litt’s
Land & Buildings Investment Management LLC nominated Mr. Kincaid and
three others to the casino company’s board, Mr. Kincaid found himself
in the cross hairs of Vail directors, including Mr. Hernandez and
Chief Executive Officer Robert Katz, according to the people. He was
uninvited from a scheduled three-day retreat for Vail directors and
soon advised that he should either give up his MGM campaign or resign
from Vail, the people said.
He decided to resign,
midterm, after almost nine years on the board. The announcement was
made last week, though it gave no reason for his departure. But in his
April 8 resignation letter, reviewed by the Journal, Mr. Kincaid cited
concerns he said were raised by Mr. Katz and other board members about
his involvement in the proxy fight at MGM.
Messrs. Kincaid, Hernandez
and Katz didn’t respond to requests for comment. A Vail spokeswoman
said she wouldn’t comment on confidential board discussions. An MGM
spokesman declined to comment.
Such boardroom rifts could
become more prevalent as shareholder activists, who typically buy
stakes in companies seeking board seats and agitating for changes,
step up attempts to gain legitimacy among companies and other
investors. As part of these efforts, activists such as Mr. Litt are
courting directors with pedigree and gravitas to offer up as nominees.
That is likely to set up battles such as that seen inside the Vail
“It can be a double-edged
sword,” said Marjorie Bowen, who has served on both corporate boards,
including that of clothing retailer Talbots Inc., and dissident
director slates. “Activists have upped their game and are nominating
candidates with real industry and boardroom experience, and that’s
been a key to their success. But those people have relationships that
are much more far-reaching.”
Mr. Kincaid sits on a
number of other boards. The 53-year-old was CEO of Equity Office
Properties Trust when the commercial landlord was acquired in 2007 by
LP in one of the biggest buyouts ever.
He is just the latest
established director to sign on with an activist. In the past year,
Trian Fund Management LP placed former H.J. Heinz Co. CEO
William Johnson on the board of
Corvex Management LP tapped real-estate mogul
Sam Zell for a proposed slate of
directors, and Third Point LLC put Steve Miller, the nonexecutive
American International Group
Inc., on the board of
Dow Chemical Co.
Offering more experienced
directors as nominees has enabled activists to make better inroads
onto boards, advisers on both sides said. Last year, activists won at
least a partial victory in 73% of all fights for board seats and other
changes, a record rate according to FactSet. Activists have also
gained entry onto boards without having to wage proxy fights,
including at large companies including PepsiCo and Dow Chemical.
But activist campaigns
remain unnerving to some on the receiving end of them, and some
corporate directors and officials continue to regard the investors as
“Having somebody show up
out of the blue and say, ‘here’s what you’re doing wrong’ isn’t always
well-received, even if the ideas themselves have merit,” said Jeffrey
Shapiro, a lawyer at Lowenstein Sandler PC who has advised both
investors and companies in activist fights.
MGM Resorts International, owner of the Bellagio hotel in Las
Vegas, above, shares the same lead independent director as Vail
Resorts. Photo: ZHANG CHAOQUN/XINHUA/ZUMA PRESS
Last week, a director at
Staples Inc., Justin King, said
he would give up his seat at the end of his term in June to protest
the company’s decision to add Kunal Kamlani to its board. Mr. King
said Mr. Kamlani, who was nominated by activist investor Starboard
Value LP, was neither “suitably qualified nor independent” and
questioned whether he would serve the interests of all shareholders at
the office-supply retailer.
Mr. Kamlani, who has
served as chief operating officer of Prestige Cruise Holdings Inc.,
said he researched Staples extensively before agreeing to join its
board and said the board itself was equally thorough with his
nomination. Starboard declined to comment. Staples thanked Mr. King
for his service and said it reviews board members to add different
skills and to the benefit of all stockholders.
Being a director is a rite
of passage for many corporate officials as they head to retirement.
Many serve on several boards, receiving hundreds of thousands of
dollars a year in fees and other compensation. That may give some
directors pause before joining forces with agitators.
Mr. Kincaid is giving up
some rich perks. Vail Resorts directors were paid about $285,000 on
average in 2013 in cash, stock and other awards, according to its most
recent proxy statement. They also received a $40,000 annual allowance
to be used at the company’s resorts, which include high-end properties
in Breckenridge, Colo., and Park City, Utah.
Vail’s board guidelines,
available on its website, said directors should tell the chairman of
the governance committee—in this case, also Mr. Hernandez—“in advance
of accepting an invitation to serve on another public company board.”
While she wouldn’t comment
on the reasons for Mr. Kincaid’s departure or whether Mr. Kincaid
violated that rule, the Vail spokeswoman said the company “has a set
of public guidelines for its board of directors that ensure strong
governance and serve the best interests of its shareholders, and all
directors are expected to adhere to them.”
Liz Hoffman at
firstname.lastname@example.org and David