Leaders of Vancouver-based Barrett Business Services Inc. returned fire against a shareholder revolt Wednesday, calling it “ill-advised” in a news release that responds, point-by-point, to criticisms of the company’s executive pay policies.
BBSI said independent advisors to its institutional shareholders have found “no significant concerns” about the company’s executive compensation program and that a “say on pay” proposal at the company’s 2011 annual meeting was approved by a wide margin.
The news release issued by BBSI was in response to recent moves by a shareholder group led by Kimberly Sherertz to oust all but one of the directors of the company.
Sherertz is the widow of former BBSI CEO William Sherertz, 64, who died unexpectedly in January 2011. She was appointed sole representative of the estate of her late husband.
She and several other investors, who collectively own about 26 percent of common shares in the company, argue BBSI’s board has too small a financial stake in the business and too little knowledge of the industry it manages.
The critics have also slammed the board for authorizing a contract with CEO Michael Elich that would pay him three times his combined salary and bonus in certain situations — though they have also publicly stated their support for Elich and the company’s branch managers.
BBSI provides human resource outsourcing and professional management consulting services.
Anthony Meeker, chairman of the company’s board, said in the news release that “we are sympathetic to the burdens that Bill’s passing has placed on his family and continue to offer our support to Ms. Sherertz as she works through the tax and other issues facing his estate. We also believe strongly that the course she is currently pursuing to replace all but one board member with her handpicked nominees is ill-advised and contrary to the best interests of the company and its other shareholders.”
In its most recent filing with the U.S. Securities and Exchange Commission, the Sherertz-led shareholder group accused the company’s board of repeatedly ignoring its requests to discuss adjustments to BBSI’s “Change in Control Agreements” — rules spelling out how executives will be compensated in case the company is acquired by another firm.
The current rules aren’t in line with industry best practices “and could materially damage shareholder value” if they’re not changed, according to Sherertz and other investors.
Not so, according to the company, which said the shareholder group has issued a series of “inaccurate and unsupported” statements.
In fact, the company said, BBSI’s board approved change in control agreements with each of the company’s three executive officers “to provide greater assurance of stability within senior management following Mr. Sherertz’s death.”
Contrary to the shareholder group’s claims that its concerns have been ignored, the company has “had frequent meetings and communications with Ms. Sherertz and her advisers in an attempt to resolve her concerns,” according to the news release.
Sherertz and other investors are calling for a special meeting of shareholders on Feb. 21 to expand BBSI’s six-member board to eight seats, keeping Elich and replacing the other board members with new directors.
According to its Jan. 13 SEC filing, the critics believe “that the incumbent board’s attempt to potentially block the requested special meeting is incredibly detrimental to BBSI stockholders.”
The failure of company directors to respond to critics’ requests to discuss their concerns “is a patent breach of fiduciary duty … for which they shall be held accountable,” according to the group’s SEC filing.
In its news release, the company says its lawyers have twice advised Kimberly Sherertz of “legal deficiencies” with her requests for a special shareholder meeting.
The company’s board of directors will continue to “consider and respond to Ms. Sherertz’s requests, consistent with applicable law and the directors’ fiduciary duties to act in the best interests of the company,” according to the BBSI news release.
“What Ms. Sherertz does not seem to recognize is that the board is responsible to all of the company’s shareholders, a responsibility it takes very seriously,” the company said. “The board finds it telling that Ms. Sherertz and her advisers believe the board owes a duty to Ms. Sherertz alone.”
