ISS Urges Dye & Durham Shareholders to Support Engine Capital’s Boardroom Overhaul
Institutional Shareholder Services Inc. (ISS), a leading independent proxy advisory firm, has urged shareholders of Dye & Durham Limited (TSX: DND) to support significant change in the company’s leadership by voting for three of Engine Capital’s proposed directors at the upcoming Annual Meeting on December 17, 2024. ISS recommends that shareholders vote the BLUE proxy card to elect Arnaud Ajdler, Hans T. Gieskes, and Anthony Kinnear to Dye & Durham’s Board of Directors.
In its recommendation, ISS highlights critical concerns about the company’s current governance and leadership, citing the ineffective oversight by the existing Board, which has failed to adequately address key issues such as poor capital allocation, rising leverage, and execution challenges. Additionally, ISS criticizes the Board’s decision to grant a $10 million payout to the outgoing CEO, Matthew Proud, despite the company’s underperformance.
ISS Calls for WITHHOLD Votes on Current Leadership
ISS also urges Dye & Durham shareholders to WITHHOLD votes for CEO Matthew Proud, Compensation Committee Chair Edward Prittie, and newly appointed director Luke McCormick. The firm’s assessment reflects deep concerns about the Board’s handling of the company’s CEO succession process and its questionable governance practices under Chair Colleen Moorehead.
According to ISS, “Various configurations of the board have been ineffective at performing oversight over the company’s founder, CEO, and strategic architect, Matthew Proud.” The firm goes on to note that shareholders would be justified in questioning the ability of the current Board, with Proud involved, to attract and retain a high-quality CEO.
In its detailed report, ISS raises particular concerns about the Board’s failure to address long-standing issues, including its inability to execute a disciplined capital allocation strategy and resolve the company’s rising leverage. ISS also points to the troubling fact that despite public commitments to reduce leverage, the company’s debt load has continued to increase.
Engine Capital’s Response: A Call for Change
Engine Capital, which owns approximately 7.1% of Dye & Durham’s shares, has long advocated for an overhaul of the company’s leadership. Arnaud Ajdler, Founder and Managing Partner of Engine, expressed his appreciation for ISS’s recommendation, particularly its endorsement of Engine’s proposed Chair and interim CEO, Hans T. Gieskes. Ajdler emphasized that ISS’s support should serve as a clear signal to shareholders about the urgent need for change at Dye & Durham.
“The ISS recommendation to elect our proposed Chair and interim CEO Hans Gieskes, and to remove Matt Proud, underscores the root causes of the dysfunction in the boardroom and the company’s lack of progress,” said Ajdler. “As ISS pointed out, the Board’s recent changes have not gone far enough in replacing those responsible for the company’s undisciplined capital strategy and poor execution.”
Ajdler added that it is essential for shareholders to elect all six of Engine’s nominated directors to ensure that the Board has the necessary expertise to lead a successful CEO search and implement a value-creating strategy. “Our directors bring critical experience in legal technology, software operations, business transformation, and corporate governance, all of which are necessary to fix the company’s culture and improve performance,” he said.
ISS Highlights Weaknesses in Dye & Durham’s Leadership
ISS’s report also pointed out the poor governance practices under the current Board, noting that several members have been complicit in the company’s failures. Specifically, ISS criticized the role of Chair Colleen Moorehead, who has overseen a period of increased leverage despite the company’s previous commitments to reduce debt. ISS also raised concerns about the Compensation Committee’s performance under Prittie, who has been on the Board since 2014 and was identified by the former chair as “unengaged.”
“Prittie, as the longest-tenured director alongside Proud, has overseen the entirety of Proud’s tenure as CEO and is seen as a key figure in the company’s struggles,” ISS stated. “His continued presence on the Board could risk perpetuating the same problems, including an overly deferential posture towards Proud.”
Engine’s Director Candidates: Qualified to Lead Change
ISS’s report also praised Engine’s director candidates, noting their significant qualifications. Ajdler, who has extensive public company board experience, is seen as providing a valuable shareholder perspective, especially during the critical CEO succession process. Gieskes, Engine’s proposed Chair and interim CEO, is recognized for his leadership and expertise in turning around underperforming companies. Kinnear, another proposed director, brings relevant legal industry experience to the table.
In contrast, ISS noted that Luke McCormick, who was recently appointed to the Board, lacks the public company experience and legal industry expertise possessed by several of Engine’s nominees. ISS’s analysis suggests that McCormick’s appointment may not be in the best interest of Dye & Durham shareholders.
