| Small & micro cap project / Activism insight

Farmer Brothers: Possible reasons for activist losing the election

by | Apr 9, 2020

In late 2019, Grossman Jeanne Farmer nominated two candidates to the board. The nominees secured a meager 11% of total shares voted in the AGM.

Possible reasons for the failure

(a) Short arguments provided by the activist

A total of 11 proxy soliciting filings have been filed by Grossman Jeanne Farmer.

In all the letters sent to the shareholders, the “arguments against the management/board” are very short. The longest complaint section is less than 500 words.

Moreover, if you remove the basic page, contact us, and nominee info, the presentation length is just 15 pages. Even though the number of slides and proxy outcomes do not correlate, a detailed list of “mistakes” and “suggestions” are required to win votes from investors. Brief complaints may not be sufficient.

(b) New CEO and board members

The majority of board members were appointed after 2017. It is difficult to argue that the board should be refreshed when the majority of the board members have served for less than three years. Moreover, the company appointed a new CEO in September, 2019, just a few months before the AGM.

(c) Lack of support from ISS and Glass & Lewis

ISS and Glass & Lewis sided with the incumbent directors. Some of the reasons cited by ISS include a refreshed board, new CEO, and improved financial performance.

Most importantly, ISS and Glass & Lewis argued that activist failed to provide a compelling reason to remove the two incumbent directors.

(d) Lack of undergraduate degree and C-level experience

Nowadays, companies such as Tesla, Google, Apple and Netflix don’t require employees to have four-year degrees. In fact, in the book titled “The CEO next door,” the authors found out that 8% of the CEOs didn’t graduate from college.

Well, when it comes to a proxy fight, it is hard to convince institutional investors to vote for a board nominee who doesn’t have a college degree, especially if he/she doesn’t have a stellar track record.

The two nominees of Grossman Jeanne Farmer do not have a college degree, and do not have any C-level executive experience.  

1 Comment

  1. Matt

    Thanks for writing this analysis. I supported her with my proxy, and after she lost I sold my position. I was wondering if she sold as well. I noticed that the stock soon tumbled and has not recovered as so many others have. I’m tempted to buy it back for cheap but I little confidence in the management since their arguments did not explain the disastrous collapse of the company over the recent years. I thought that if they won’t be frank than I won’t trust them.


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