MILL VALLEY, Calif.,
May 13, 2015 /PRNewswire/
-- Lawndale Capital Management, LLC and its affiliated
activist funds ("Lawndale"),
beneficial owners of nearly 1.6 million, or 2.6%, of Willbros
Group, Inc. (NYSE: WG) ("Willbros" or the "Company,") announced
today its intent to vote "FOR" a shareholder proposal calling for
Willbros' board members to be elected annually instead of its
present practice of its board members serving staggered 3-year
terms. The shareholder proposal will be voted on by Willbros'
shareholders at the Company's Annual Meeting scheduled for the
morning of June 9, 2015 in
Houston.
On May 12, 2015, Lawndale sent a letter to Willbros' Lead
Independent Director, S. Miller
Williams, for distribution to Willbros' Independent
Directors, informing them of Lawndale's intent to vote " FOR" Proposal #5,
often called a "de-classify" or "de-stagger" proposal. The
letter also called for Willbros' Board to implement additional
reforms to its corporate governance practices and structure to
address changes made necessary when formerly Independent Chairman
John McNabb was appointed as the
Company's CEO.
Lawndale's letter, a copy of
which is set forth below, called for the following additional steps
regarding fixing Willbros' "broken" corporate governance:
- The Independent directors need to serve the PRIMARY role in
Willbros' director search and nomination process and not CEO
McNabb;
- The Board should replace Edward
DiPaolo, a long-time friend and former business partner of
CEO McNabb, from the Willbros' Nominating/Governance Committee that
he presently Chairs;
- Willbros' Lead Independent director, Williams, should "step up"
to his role and ensure an appropriate non-management dialogue
conduit with respect to shareholder concerns on topics that are
properly deliberated and decided by Independent Board members and
not CEO McNabb;
Andrew Shapiro, President of
Lawndale, stated, "Having
directors stand for elections annually makes them more accountable
to shareholders, and could thereby contribute to improved
performance and increased firm value. The existence of staggered
director terms at Willbros entrenches and immunizes ineffective
directors from necessary accountability and potential replacement
by the company's shareowners."
Shapiro added, "Having a long-time friend and former business
partner of your CEO as Nominating/Corporate Governance Committee
Chairman raises serious conflict and governance concerns and is
inappropriate. A truly Independent Board committee should
direct and run the director search and nomination process."
The full text of Lawndale's letter follows:
[Lawndale Capital Management, LLC
Letterhead]
Andrew Shapiro
President
May 12, 2015
By e-mail and overnight delivery
S. Miller Williams
Lead Independent Director
c/o Corporate Secretary
Willbros Group, Inc.,
4400 Post Oak Parkway, Suite 1000
Houston, Texas 77027
Dear Mr. Williams:
Lawndale Capital Management, LLC, through the funds it manages,
("Lawndale") currently owns 2.6%
of Willbros Group, Inc. ("Willbros" or the "Company") common
stock. The recently filed Proxy for Willbros' upcoming
June 9, 2015 Annual Meeting provided
disclosure on the Company's corporate governance and compensation
polices, solicited support for several management sponsored
proposals and opposed a shareholder-sponsored proposal to
de-stagger Willbros' Board elections.
We are writing to explain our concerns over Willbros' corporate
governance and the rationale of Lawndale's vote at your upcoming June 9, 2015 annual meeting:
- "FOR" Proposal #5 - eliminating Willbros' classified Board
of Directors and requiring all directors stand for election
annually
Our attempts to discuss these concerns with you directly have
been blocked by new CEO John McNabb,
whose outdated approach to corporate governance has further
contributed to our decision to make this letter and our concerns
public. We ask that you distribute a copy of this letter to
all Independent members of Willbros' Board and confirm your receipt
and said distribution.
Lawndale's Rationale To Vote
"FOR" Approval Of Proposal #5 ("De-Classify" Resolution)
In a company such as Willbros, where shareholders are not
allowed to call special meetings or act by written consent, the
annual meeting election becomes the only forum where shareholders
can hold its directors accountable for their oversight and
management (or lack thereof) of the company's affairs.
Having directors stand for elections annually makes them more
accountable to shareholders, and could thereby contribute to
improved performance and increased firm value. In addition to
Lawndale's practical experience
over more than two decades as an activist investor, we are further
persuaded by the many academic studies that connect classified
boards with lower firm valuation and value-decreasing decisions and
policies.
We further note that studies cited by Willbros in its Proxy with
contrary findings have included a population of companies ranging
from well managed to poorly managed. But, in the instance of
Willbros, we don't have a range. Instead, we have clear
evidence of a mis-managed and mal-governed company that suffers
from poor oversight and material weaknesses of internal
controls.
During your tenure and that of all of your fellow directors
(excluding new director nominee Wedmeyer), Willbros has a long
history of risk management issues that have negatively affected
shareholder value. This history includes, but is not limited
to the following:
- a violation of the Foreign Corrupt Practices Act in 2008 and
associated settlement agreement that resulted in $56 million in payments by Willbros Group
- a very costly 2014 accounting restatement that encompassed two
quarters and millions of dollars of newly discovered losses,
and
- an incomprehensible inability to forecast operating prospects
sufficient to avoid a prospective loan covenant breach after only a
single quarter of the loan's existence.
The need for accountability and change at Willbros Group is not
theoretical; it's real and apparent. The need for
accountability is now, not over the course of multiple years.
The existence of classified staggered director terms at Willbros
entrenches and immunizes ineffective directors from necessary
accountability and potential replacement by this company's
shareowners.
With Over 30% Of Willbros Stock Entrenched, Board Should Heed
Any Near 35% Affirmative Vote
The vote on Proposal #5 is technically "approved" if Willbros
receives the affirmative vote of a majority of the total number of
shares present. However, with a huge 16.6% block of stock
given away to the company's lender, KKR, on top of another 13.1%
held by InfrastruX/Tenaska, which is subject to a voting agreement
with the Company, only 70% of the total outstanding shares of
Willbros are free to vote either "FOR" or "against" Proposal
#5 to de-classify Willbros' director elections. We think a
truly independent Willbros' Board should properly view a "FOR" vote
totaling a majority of the non-insider/lender shares (or
approximately 35% of total outstanding) as sending a resounding
message that the board has a need to reform its corporate
governance structures and move to de-classify Willbros' director
elections.
Additional Reforms Needed To Fix Broken Willbros Corporate
Governance
In light of the conversion of former Independent Chairman McNabb
to become CEO, his insistence on maintaining a tight grip on
Willbros' Board composition and corporate governance practices
indicates reforms in the functioning and composition of the
Company's Board are desperately needed.
As Independent Chairman since September
2007, Mr. McNabb may have been the appropriate director for
shareholders to dialogue with regarding the above-mentioned risk
management and governance events. However, as recognized by your
appointment as Lead Independent Director, it is no longer best
practice for Willbros' Board to limit or delegate shareholder
dialogue on all matters, especially corporate governance and
compensation policies, exclusively to Mr. McNabb in his new role as
CEO.
Hence, when requesting a dialogue with you several times, it was
appalling that I was only allowed discussion with CEO McNabb.
Further surprising was his lecture on his complete grasp of
corporate governance best practices.
While we are impressed with the background and experience of new
director nominee Mr. Phil Wedemeyer,
we were disappointed by CEO McNabb's representation that this
nominee selection (as well as others) was sourced and ultimately
made by Mr. McNabb himself. We aren't sure whether Mr.
McNabb, formerly as Independent Chair, "hand-picked" the rest of
the directors on Willbros' Board. But the impression created
by Mr. McNabb of the Company's director selection and nominations
process, to say the least, is not best practice.
CEO McNabb is no longer Independent. You and the other
Independent directors need to step up to your appropriate role in
the director search and nominations process. While
perhaps technically "Independent" in the eyes of stock exchange
rules, having long-time McNabb friend and former business partner,
Director Edward DiPaolo remain
Nominating/Corporate Governance Committee Chairman, a role clearly
reserved for independent oversight, raises serious additional
conflict and governance concerns and is inappropriate.
Certainly CEO McNabb should provide input as to what skills and
experience he feels would be value added to the Board. But
most of the rest of the process and the ultimate decision of who is
nominated must be in the hands of an independent
Nominating/Governance Committee headed by a truly Independent
Chair.
Lawndale has identified highly
qualified independent individuals that we feel would be good
additions to Willbros' Board. A truly Independent Board
committee should be the group who vets such candidates, not CEO
McNabb, nor his long-time friend, Mr. DiPaolo. We would like
to discuss these candidates with you and, if given the opportunity
to better understand the experience and background needs of the
Board, I am sure we could further improve our suggestions.
It is readily apparent that the status quo of the Willbros'
Board when Mr. McNabb was Independent Chairman remains unchanged,
despite Mr. McNabb now being CEO. This is not
acceptable. We have requested and continue to seek dialogue
with you and an Independent Nominating/Governance Committee to
discuss and address these corporate governance concerns. It
is not the proper province of CEO McNabb to determine, decide or
declare the Company's response to a request that was directed to
Independent directors.
You, as Independent Lead Director, need to step up to your
role and ensure an appropriate non-management dialogue conduit with
respect to Willbros' shareholder concerns on topics that are
properly deliberated and decided by Independent Board members and
not CEO McNabb.
We await YOUR timely reply/response on the matters set forth
above.
Sincerely,
[Signed]
Andrew Shapiro
President
About Lawndale Capital Management, LLC
Lawndale Capital Management, a San
Francisco Bay Area-based Investment Advisor manages
activist/relational hedge funds that have created value for more
than 22 years in small- and micro-cap companies. Lawndale's multiple approaches to active
shareownership support a repeatable and value-oriented investment
process deployed across the capital structure in contrarian,
special situation and event-driven investments. Lawndale deploys a unique combination of
legal, equity and credit skills with boardroom and corporate
governance expertise to engage the management, board of directors,
and shareholders of its portfolio companies in a productive
relational dialogue.
For Further Information Contact:
Andrew Shapiro,
415-389-8258 or
aeshapiro@lawndalecap.com
Follow Andrew Shapiro
on:
Seeking Alpha:
http://seekingalpha.com/author/andrew-shapiro
Twitter: http://www.twitter.com/lawndale1
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SOURCE Lawndale Capital Management, LLC