Another proxy advisory firm has weighed in on the ongoing battle over Kohl’s boardroom, this time in strong favor of the company’s current leadership.
San Francisco-based Glass Lewis has recommended that Kohl’s Corp. shareholders vote for all 13 of the company’s incumbent board directors over the 10 candidates nominated by Macellum Capital Management, an activist investor campaigning to overhaul the board in order to improve performance or pursue a full sale of the company.
In a news release Tuesday, the Menomonee Falls-based retailer cited a report by Glass Lewis that suggested shareholders “would be best served supporting the current board and its efforts to enhance shareholder value” – through either the existing turnaround strategy or ongoing sale review process.
Kohl’s has been vetting potential suitors for a possible sale, having retained Goldman Sachs to engage with bidders. CEO Michelle Gass recently said the company has engaged with more than 25 parties since January. Macellem has questioned whether the board is committed to conducting a sales process that’s as thorough as the company claims it is.
Glass Lewis set aside those doubts: “In our view, and contrary to (Macellum’s) assertions, the company has been reasonably transparent regarding various key aspects of the sale process, and we see no substantive evidence to suggest the board is not actively soliciting/entertaining any and all credible offers.”
It also noted that a shift in board leadership could negatively impact the sales review process.
Further, the firm sees Kohl’s strategy as “largely compelling and indicative of a board and management team that is committed to improving the company’s standalone financial results.”
Glass Lewis is the second proxy advisory firm to come out with its stance on the proxy fight, which is expected to culminate at the Kohl’s annual meeting on May 11, where shareholders will have a chance to vote for either party’s nominees. Last week, Maryland-based Institutional Shareholder Services Inc. recommended in a report that Kohl’s shareholders vote to elect two of Macellum’s director nominees but noted that the company does not need “sweeping changes at the top to execute a turnaround.”
The two reports follow news that Kohl’s has the backing of investment management firm T. Rowe Price, which is one of the retailer’s largest shareholders, owning 6.8 million shares or 5.29% of the company at the end of last year, according to Reuters.
“We find strong evidence that the incumbent board is committed to choosing the path it believes has the highest likelihood of shareholder value creation. Furthermore, we are confident the board is employing an independent and rigorous process to determine the appropriate path for the company,” T. Rowe Price said in a case study.
T. Rowe’s decision to support Kohl’s was seen as a setback for Macellum, which may need the full support of Kohl’s institutional investors in order to win the boardroom election, said David Swartz, an analyst at Morningstar Research Services.
“If all the institutional owners vote for Macellum’s group, then they only need a minority of the small shareholders to vote with them to win,” Swartz said in an email recently.
Other institutional-investor owners of Kohl’s include The Vanguard Group with a 10.8% ownership stake, BlackRock Inc. with 10.4% and JPMorgan Chase & Co. with 5.8%, according to Kohl’s 2022 proxy statement. All three firms have declined to comment on how they intended to vote in the company’s upcoming board election.
