May 1, 2019
My fellow shareholders of Barrett Business Services Inc.:
My
name is Wayne King, and I am a private investor and owner of BBSI with 290,015 shares representing 3.9% of outstanding. I’ve been an owner continuously since 2008 and believe with effective long-term risk management, the future for BBSI and
shareholders is very bright. I have submitted a proposal that the Company adopt market-standard proxy access provisions in our bylaws. Our Board has made several statements in opposition to this proposal, and I wanted to provide some additional
context for your consideration.
Proxy access is now a part of good corporate governance. It allows long-term shareholders with material holdings to
nominate directors of their choice, and place them on the Company ballot for a full shareholder vote. Since 2014, proxy access has become widely accepted across U.S. companies. It’s now a mainstream feature of S&P 500 companies, nearly so
in the Russell 1000, and the momentum behind it is strong.
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Proxy access adoption rate
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2014
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2018
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S&P 500
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1
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%
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71
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%
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Russell 1000
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<1
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%
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48
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%
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Total Adoptions
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15
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565
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Source: Sharkrepellent.net
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99.3% of US companies have adopted proxy access with a threshold of 3% ownership held for a minimum of 3 years, including 78
Russell 2000 companies. I expect this trend to continue.
The rapid pace of adoptions confirms that shareholders want more say in director nominations.
Proxy access gives owners a voice and a choice.
Our Board’s dismissive response to this mainstream proposal is regrettable. In particular, the
Board’s objection that the proposed terms are “not tailored to the Company” rings hollow when the Board has refused to engage with me, despite explicit offers, on this issue. If the Board is merely concerned about the specific terms
of the proposal, it could have constructively proposed an alternative, whether to me or to the shareholders generally. Instead, the Board, with an average tenure of 13 years (including four directors with tenures of 15, 18, 19, and 26 years),
appears to flatly oppose a mainstream proxy access proposal in a manner reeking of self-preservation.
The Board further points out that “the costs
of drafting, ratifying and maintaining a proxy access bylaw are not insignificant,” and further objects to “expense and extra activities”. The costs to the shareholders to adopt proxy access bylaws are minimal, especially when
compared to the healthy governance advantage such adoption would provide.
Suggestions that proxy access is “more appropriate” for larger
companies, and boilerplate excuses such as “our Board is [already] accountable” also ring hollow, because experienced investors understand that board dysfunction can creep into companies of all sizes, and reducing friction in director
nominations through proxy access can be a catalyst to address current and future problems.
Finally, it is particularly ironic that in arguing against
adoption of the proposal, the Board suggests that a group of investors with 3% ownership may not have “substantial capital at risk”, when the aggregate share ownership of the six independent directors is only 1.6%.
A principal of good governance is that control should be aligned with the right incentives, and giving shareholders with a material stake in the Company the
chance to be heard (and, it’s worth noting, a director nominee would only be elected upon a vote offered to all shareholders) will only further ensure that our Board’s success is properly aligned with the success of the Company.