marrone

Marrone Bio’s Problematic Behavior

I will not bother taking Marrone Bio Innovations (MBII) to court. The company is young and inexperienced in dealing with SEC rules and shareholder advocates, such as myself. However, I cannot give them a complete pass. Below is a draft of my remarks to be delivered to those attending the January 31 Annual Meeting. Today is the last day to vote online. Please see Marrone Bio Innovations, Inc: Proxy Vote for my recommendations.

Marrone Bio: In Support of Proxy Access

Marrone Bio stock was about 70 cents a share at out last annual meeting on May 25, 2016. Happier today, but why did it rocket to $19 a share in 2014 and than tumble?

One reason was that our former chief operating officer concocted a scheme to inflate the company’s revenue. He netted undeserved bonuses built on illegitimate expenses. Our company paid $12 million to settle a class action lawsuit, plus a large fine to the SEC.

Where were the Comp and Audit Committees? Where was the Board? Obviously, there was a lack of accountability at Marrone Bio. All the problems have not just gone away. An investigation into a possible breach of fiduciary duty may lead to another shareholder lawsuit, as announced January 19th.

One way other companies are ensuring boards don’t lose their focus is to adopt proxy access, allowing a group of long-term significant shareholders to nominate up to a quarter of the board and to place those nominees directly on the proxy. Proxy access can’t be used to take control of a company. It simply gives long-term shareholders more influence.

About 75% of S&P 500 companies have adopted proxy access. Mid- and small-cap companies, especially those seeking institutional investors, are also adopting proxy access.

I’ve introduced dozens of proxy access proposals at other companies. Most, like Citigroup Franklin Resources, and WD-40 negotiate a withdrawal or changes before the annual meeting. Other, like Northern Trust, simply adopt proxy access once a proposal arrives.

Marrone Bio: Rule Violation

Marrone Bio not only did not negotiate, they changed the title of the proposal from “Shareholder Proxy Access” to “Stockholder Proxy Access Amendments.” The revised title gives the impression that amendments are sought to an existing proxy access right. But, shareholders have no such right. In addition, our company failed to provide a copy of their opposition statement 30 days prior to publishing the definiteve proxy, as they are legally are required to do. [Rule 14a-8(m)(3)(ii)]

Marrone Bio: Entrenchment

Consider also that Marrone Bio has various board entrenchment devices:

  • Classified board with staggered terms –  It takes two years to vote a majority off the board.
  • Directors are elected by a plurality vote – if unopposed, it takes one vote and reelected.
  • Shareholders have no right to act by written consent and cannot call special meetings.
  • Amending our bylaws requires a supermajority vote.

I can understand maintaining some of these devices for a limited time to ensure our company isn’t snapped up on the cheap. Marrone Bio has great potential as consumers become more health conscious and growers try to maximize efficiencies and sustainability.

Marrone Bio: Proxy Access

Proxy access would make our board more accountable to significant long-term shareholders, without making it vulnerable to a hostile takeover. It would signal to investors that our company welcomes giving shareholders a voice, despite corporate governance features many would find objectionable.

Vote FOR proposal 6, “Shareholder Proxy Access,” or as the Board has mislabeled it, “Stockholder Proxy Access Amendments.

   

 
 

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