Two proxy advisory firms have weighed in with opposing views on Penn Entertainment’s director nominations.
On Friday, Institutional Shareholder Services recommended Penn Entertainment shareholders to vote with HG Vora‘s proxy card for three new directors.
On Monday, Glass Lewis recommended voting the company’s card that includes just two nominations. Penn’s general meeting is scheduled for June 17.
Penn’s stock closed at $16.48 Monday, up 5.7% from Friday’s close.
HG Vora wants three new directors
HG Vora first called for three directors to be added to the board back in January when calling Penn out on its failed attempts at sports betting.
The shareholder says it had dialog with Penn that led it to believe all three of its nominees would be up for vote, though Penn is only nominating two of the three for board seats.
HG Vora sued the regional gaming operator last month for allegations of violating federal securities laws and breaching its fiduciary duties. The case will not be decided before the vote.
In response to HG Vora, Penn said the report did not reflect a “realistic view” of Bill Clifford‘s candidacy and again outlined why Penn does not see its former employee as a good fit.
HG Vora highlights key areas
HG Vora pulled quotes from the ISS report hitting on three specific areas:
- Penn’s underperformance and errors under the current board: “It is particularly difficult to overlook the negative inflection that coincided with expansion into online sports betting, which is highlighted by the dissident.”
- Lack of management oversight of the board: “[T]here is little evidence that the board has been able to hold management accountable, as the company has continued to pursue a strategy that has failed to deliver on expectations.”
- All three directors should be approved: “[With respect to Clifford …], there is little evidence that the board has been able to hold management accountable, which suggests that a director who is not afraid to share a contrarian viewpoint may be a valuable addition.”
ISS concluded that shareholders should vote the dissident card, which allows voting for Clifford along with the other two nominations, Johnny Hartnett and Carlos Ruisanchez.
Penn: ‘realistic’ view of Clifford missed
Penn noted in its response that ISS recognized the “serious consideration” the company gave to all three of the dissident nominees.
Where ISS fell short, Penn claims, is in reflecting a “realistic view” of Clifford’s candidacy. The company rehashed the points it made previously concerning Clifford including how he previously pushed back against initiatives as Penn CFO that “resulted in meaningful margin improvement.”
“Further, during his interviews with PENN’s Nominating and Corporate Governance Committee, Mr. Clifford demonstrated antiquated views of a rapidly changing industry, and the same posture of resistance to exploring value-generating solutions, which we believe would hinder constructive decision-making,” Penn said.
GL: Penn changes align with history
Penn filed a proxy update Monday afternoon with select comments from the Glass Lewis report.
Glass Lewis said it did not “find sufficient evidence that the board acted in bad faith or with the primary purpose of entrenchment,” adding that the company conducted “thorough” interviews with all three nominees.
“Based on our review, we believe certain aspects of Clifford’s profile may overlap with existing or anticipated members of the board … the board’s assertion that his background is not sufficiently differentiated – and its unanimous decision not to support him despite backing two other dissident nominees – raises questions as to whether he would bring distinctive value at this time,” read one quote Penn pulled from the report.
The report also noted how Penn’s decisions align with how the board has chosen or not chosen to fill vacant seats in the past. The firm added it found no “clear and compelling evidence” that the board acted in bad faith.
