The Glass Lewis report was published following moves by a group of activist Praemium shareholders to replace the current board of directors on the grounds that their sudden termination of former chief executive Michael Ohanessian has resulted in a loss of confidence among shareholders.
In its analysis of the board contest, Glass Lewis said the conflict was driven greatly by “hearsay” and that “unaffiliated investors have been placed in a very challenged position” as a result, but what evidence is available weighs against the case for a new board.
“The board suggests Mr Ohanessian's private interactions were both obstructive and corrosive; Mr Ohanessian rebukes that the now-publicised exchanges reflect healthy, robust debate over critical strategic decisions,” Glass Lewis said.
“On balance, while we offer some incremental agreement that active, thoughtful debate by and among directors and senior executives is very often a fundamental component of a healthy boardroom, we believe the sum of the extant factors, uncertain as they are, ultimately weigh against the dissidents' campaign.”
The company noted that Mr Ohanessian was one of the signatories of the original document that brought about the special meeting about the future of the board, and that much of the dissident shareholders’ arguments focus “almost exclusively on the purportedly critical nature of Mr Ohanessian's involvement with the company”.
“We would thus argue it is decidedly dubious for Mr Ohanessian to be party to a framework that effusively comments on his own service, while contemporaneously suggesting – with the tone of a wholly external observer – personal uncertainty around the dissident group's intentions,” Glass Lewis said.
Glass Lewis cautioned that the intentions of the dissident shareholders were “perhaps the most problematic issue at play” and that the proposed changes would result in a board of “just three members, none of which have offered a clear agenda other than the presumed reinstatement of Mr Ohanessian”.
“In such a scenario, Mr Ohanessian would resume his prior executive role, but would instead be answering – in what we expect would be fairly nominal terms – to a strategically rudderless board elected as an extension of a campaign in which Mr Ohanessian was a major participant,” Glass Lewis said.
Praemium’s handling of Mr Ohanessian’s termination “invited preventable speculation and volatility”, Glass Lewis said, noting that “Mr Ohanessian's abrupt termination … appears to dovetail rather poorly with the company's track record under his stewardship”.
“Nevertheless, as the more substantive impetus for that termination has emerged – and as the dissident group has largely eschewed several opportunities to divorce itself from the notion that it operates primarily as an otherwise strategy-free vehicle to reinstate Mr Ohanessian – we believe sufficient doubt has been raised around the merits of supporting the dissident agenda,” the company said.
A spokesperson for Praemium said the company “intends to bring it to the attention of its shareholders but because it’s self-explanatory, not add comment on it”.
Mr Ohanessian declined InvestorDaily’s request for comment, and Australian Ethical and Paradice Investment Management – both members of the ‘dissident group’ of shareholders – did not provide a comment by deadline.
In a letter previously sent to shareholders, the dissident group noted the proposed directors were nominated by fellow dissident shareholder Abercrombie Group and are independent of any of the requisitioning shareholders.
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