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2007 Conclusion

Forum activities relating to Farmer Bros. Co. were suspended in 2007, following the second year of new management.

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Glass Lewis & Co., a proxy adviser to institutional investors, recommended in its "Proxy Paper" report for the Farmer Bros. December 14, 2004 annual meeting that the firm's clients withhold votes for the three candidates presented by management for reelection to the company's board of directors.  The firm concluded that "we believe that shareholders' best course of action is to replace the board with a board that is dedicated to their interests and that will work to protect those interests above all else," after considering

The section of the Glass Lewis Proxy Paper addressing the election of directors is copied below, with permission.















[Pages 4-5]


The board has nominated three candidates to serve a three-year term each. If elected, their terms would expire at the Company's 2007 annual meeting of shareholders.


We note that three of the seven directors are either affiliated with the Company or are insiders. This raises concerns about the objectivity and independence of the board and its ability to perform its proper oversight role. We prefer boards with a lower percentage of affiliates and insiders.


We believe it is important for shareholders to be mindful that the Company's management sought SEC approval to block a shareholder proposal for the protection of employee pension rights recently submitted by Lime Capital Management. On August 25, 2004, management's legal representation submitted a letter to the SEC arguing that the proposed amendment to the Company's bylaws concerning an ESOP's trust assets relates to employee compensation, and as such it "would remove the board from the ultimate control of compensation related decisions and would place control of such decisions in the hands of the employees." The letter also argues that Company's directors are "the most qualified persons to deal with any conflicts that may arise between the interests of management, the other employees and the stockholders," and that the proposal would place control instead "in the hands of employees who are not independent and may not act in the best interests of the stockholders of the Company." Employees share an interest in approximately 3 million shares or 18.7% of the Company's stock through their ESOP. The individuals who have served as directors during the past year own less than 1% of the Company's common stock. We note that the Lime Fund proposal is not included in this year's proxy.


We recommend withholding votes from the following nominees up for election this year based on the following issues:


Nominee CARSON served as vice president of sales of the Company until August 2004. Due to the lack of a twothirds independent board, we recommend withholding votes from this nominee based on his status as an affiliate.


Nominee COFFMAN is the senior member of the nominating committee. The Company's CEO is also the chairman of the board and the board does not have an independent lead or presiding director. We view an independent chairman as better able to oversee the executives of the Company and set a pro-shareholder agenda without the management conflicts that a CEO or other executive insider often faces. This, in turn, leads to a more proactive and effective board of directors. When the positions of the CEO and chairman of the board are not separated, we believe that it is the responsibility of the nominating committee to appoint an independent lead or presiding director to ensure proper oversight.


We recommended that shareholders withhold votes for all of the director nominees up for election at the February 23, 2004 shareholder meeting based on the board's attempt to curtail the rights of shareholders. The board submitted proposals to be voted on at that meeting, which were subsequently approved, to reincorporate the Company in Delaware and adopt a series of anti-takeover provisions. We note that director and officer votes (assuming all were cast in favor of the proposals) made up between approximately 66% and 67% of the vote in favor of the proposals for the new certificate of incorporation and bylaws. The proposed provisions included classifying the board, prohibiting shareholders from acting by written consent and prohibiting shareholders from calling special meetings. We believe the Company's new certificate of incorporation and bylaws make directors less accountable to shareholders and could discourage takeovers, which may offer shareholders a premium for their stock.


Nominees COFFMAN and SAMORE both served on the board when the new certificate of incorporation and bylaws were proposed and implemented. While we would not typically oppose directors on the basis of proposals put on the ballot by the board, the steps taken by the board and management in the proposals discussed above are potentially harmful to shareholders and so contrary to shareholder interests, we feel the board and management have placed their own interests above those of the Company's owners. Therefore, we believe that shareholders' best course of action is to replace the board with a board that is dedicated to their interests and that will work to protect those interests above all else.


Accordingly, we recommend that shareholders vote:


WITHHOLD: All nominees



This proxy analysis is confidential and may not be reproduced in any manner without the written permission of Glass, Lewis & Co. This analysis is not intended to solicit votes and has not been submitted to the Securities and Exchange Commission for approval. No warranty is made as to the completeness, accuracy or utility of this analysis and investors should not rely on it for investment or other purposes.




The Forum is open to all Farmer Bros. shareholders, whether institutional or individual, and to professionals concerned with their investment decisions.  Its purpose is to provide shareholders with access to information and a free exchange of views on issues relating to their evaluations of alternatives.  As stated in the Forum's Conditions of Participation, participants are expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

There is no charge for participation.  Franklin Mutual Advisers, LLC, the manager of funds owning approximately 12.6% of Farmer Bros. shares, provided initial sponsorship for the Forum and arranged for it to be chaired by Gary Lutin.  Continuing support and guidance of the Forum is provided by an Advisory Panel of actively interested shareholders.

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