Over the last few weeks, our wonderful TCL data analysts have been sending the research team an email every time they process an 8-K with annual meeting voting results which show that a director has failed to receive support from a majority of shareholders. We have been surprised at how many there are – and we’re keeping track for a comprehensive report to be published this summer. In the meantime, we will be blogging about those that stand out.
For example, shareholders at Sterling Bancshares have voiced their continued dissatisfaction with director R. Bruce LaBoon. At the company’s annual shareholder meeting held on April 26th, 58% of the votes were withheld from Mr. LaBoon’s re-election as director. The last time he was up for election, in 2007 -- the company has a classified board -- 48% of the votes were withheld.
Mr. LaBoon serves “of counsel” at Locke Lord Bissell & Liddell LLP, a law firm that provides services to the company. In its proxy statement, the company claims that the “attorney fee arrangement with Locke Lord is negotiated on the same basis as arrangements with other outside legal counsel and is subject to the same terms and conditions.” However, shareholders seem to be concerned -- as we are -- that the relationship has the potential to undermine Mr. LaBoon’s independence and ability to effectively monitor management. We noticed that the Sterling Bancshares annual meeting was held at the Locke Lord offices and that Mr. LaBoon reports the law firm’s address as his address on his Form 4, further supporting at least a strong perception of a conflict of interest. We see situations like this often – presumably, the board feels that they have sufficiently considered the potential for a conflict and have decided that, in this case with this individual person, it is not a concern. However, since shareholders are not involved in these deliberations and do not know the personalities involved to be assured that no conflict will arise, the best course of action is to avoid the potential for conflict and not have lawyers who are affiliated with firms which provide services to the company serve on the company’s board.
Annalisa Barrett - Senior Research Associate
