ISS and Glass Lewis Endorse Management And Dissidents, According To DSP Group And Starboard


Everyone’s a Winner!

Starboard Value LP is waging a proxy battle with DSP Group, Inc.  Proving their value to the investment community, ISS and Glass Lewis weighed in allowing both parties to claim victory.  Using the battling parties’ releases, let’s see if we can see if there is a clear leader in the fight for the hearts and minds of proxy advisors.

Starboard picks some quotes out of each proxy advisor’s report to show that change is needed at DSP Group. ISS has said that:

  • To address this apparently ongoing board reluctance to embrace a shareholder perspective, therefore, shareholders should WITHHOLD votes from management nominee Ayalon (Item 1.1), who as Chairman over the past year failed to ensure that the two shareholder nominees appointed as part of the settlement in 2012 were also assigned to committees and fully integrated into board discussions.”
  • “Though these are positive changes in the company’s governance profile, the reactive nature of their adoption creates more concern about the board’s leadership, rather than the confidence in a truly proactive sense of accountability for which shareholders might have hoped after the 2012 settlement.”
  • “The dissidents claim that the company has experienced dramatic stock price underperformance over an extended period of time. This appears to be true.”

Glass Lewis has said that:

  • “To be sure, the Dissident’s nominees possess turnaround skills and have operational experience as executives of technology companies, including semiconductor companies.”
  • “[S]ome of those efforts, particularly the Company’s latest governance improvements, are likely the result of the Dissident’s agitation. Without Starboard’s involvement, we admit that the board may not have admitted some of its past failures and rectified some of the concerns previously identified.”
  • “Until recently, the board’s nine members included five directors that had served on the board for more than 10 years. They include the chairman, who was also the Company’s former CEO. Such a board makeup tends to deter the development of new ideas, alternatives and direction, or the accountability of executives and directors. This is especially concerning at a Company with a declining core product and the need to innovate in order to survive.”

Winner Starboard?  Well . . .

According to DSP Group, have both issued reports recommending that DSP Group’s stockholders vote on the for management nominees and reject the directors nominated by Starboard Value LP.

In addition, Glass Lewis seems to have said that:

“Over the last six quarters, the Company has successfully executed on its turnaround and growth strategy. Currently, we believe the board’s plan is more likely to result in greater shareholder value than a potential sale of the Company, which until recently was the Dissident’s only strategic suggestion. In light of the latest results, which the board believes will result in greater value than a sale of the Company, we believe shareholders should allow the board the opportunity to continue executing on its strategic plan.

DSP Group then piled on by saying that “these positive recommendations for the reelection of the DSP Group slate of directors and a rejection of all additional Starboard nominees by the two leading independent proxy advisory firms reflect a vote of confidence in the current Board and the strategic direction in which the Company is headed. Both proxy advisors questioned the value of additional Starboard representation for stockholders and recognized that Starboard failed to make a compelling case that further change at the Board level is necessary”.

Clear enough?

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