Directors Glickman and Hyde Failed to Receive
Majority Support and Should Promptly Resign
Shareholders Put Directors Auerbach and Johnson
On Strong Notice with Near Defeats
On Heels of Last Year’s 88% Vote Supporting a
Recapitalization of Its Corporate Golden Share, Monro Finally
Acknowledges “Clear Message” From Shareholders
Board Should Work with Director Recruitment
Agency to Identify New Independent Directors with Automotive
Industry Operating Experience
Board Should Immediately Form a Strategic
Review Committee to Assess Third Party Interest
Ides Capital Management, LP (together with its affiliates,
“Ides”) is a New York-based investment advisor that engages with
corporate boards and management teams to drive long-term
shareholder value, sustainable change and inclusive outcomes at
small and mid-capitalization publicly traded companies.
Ides, a long-term shareholder of Monro, Inc. (“Monro” or the
“Company”) (NASDAQ: MNRO) is gratified that, on the heels of Ides’
“Vote No” campaign, Monro’s common shareholders have sent a
resounding signal that change to Monro’s Board of Directors (the
“Board”) is warranted: a majority of Monro’s voting common
shareholders withheld their support from Directors Donald Glickman
and Lindsay Hyde.
Ides further underscores that Monro’s common shareholders have
put Directors John Auerbach and Leah Johnson on strong notice,
having been reelected through the narrowest of margins, with
Director Auerbach receiving a mere 52% vote and Director Johnson
receiving a 56% vote. Moreover, Director Michael Broderick, who has
held the position of Monro CEO for less than a year and a half,
received a 32% withhold vote in his very first appearance as a
director candidate at Monro’s Annual Meeting.
In light of the back-to-back annual meeting shareholder votes
mandating change at long-term underperformer Monro, Ides believes
the Board must take action on four key matters, which we detail
below. These matters include: (1) the immediate resignations of
Directors Glickman and Hyde (2) the commencement of a
recapitalization of the Company’s multi-class structure into a
single class of voting stock with equal rights (3) the retention of
a director placement agency in tandem with shareholder input to
retain new boardroom talent including independent directors with
automotive industry operating experience and (4) the creation of a
strategic review committee to explore superior alternatives for
Monro’s shareholders.
In Monro’s recent press release, the Company seemingly concedes
Director Glickman’s and Director Hyde’s forthcoming resignations
though simultaneously attempts (in vain) to pull the wool over
shareholders’ eyes by delaying their departures “until” some
undefined time before next year’s annual meeting. In support of
this delay, Monro cites several weak and irrelevant justifications.
The reality is that there is only one truly pertinent fact to the
matter at hand. Monro’s shareholders have spoken for themselves and
have rejected two of the Company’s nominees: Directors Glickman and
Hyde failed to receive majority support and, accordingly, should
promptly resign.
Monro’s failure to accept the majority vote of its common
shareholders is part of a troubling pattern of the Board’s
overarching disregard of shareholders’ will as expressed through
their votes. To be clear, it is not that shareholder mandates do
not exist at Monro. It is that shareholder mandates do exist but
are rejected on the basis of the Board’s “belief” that it knows −
better than shareholders themselves − what is in “shareholders’
best interests.” Last year, 88% of Monro’s voting common
shareholders supported Ides’ proposal requesting that the Board
take steps to initiate and undertake a recapitalization at the
annual meeting of shareholders. That recapitalization mandate
remains unsatisfied and must immediately be effectuated by the
Board if it wishes to sidestep any hints of a “kangaroo court”
modus operandi.
Monro’s press release additionally details that the Company
intends to expand the Board in order to add new talent.
Conceptually, we agree with this recently announced effort to
augment the Board with new directors possessing skills, attributes
and expertise the current Board sorely lacks. We believe, however,
it is imperative that we shed some “disinfecting sunlight” in the
form of background information and context around the many
deep-seated flaws in Monro’s director mix and recruitment process –
issues that Ides has repeatedly communicated to the Board. At the
outset, however, we underscore that there should be no immediate
need to expand the size of the Board given the two seats that
should be vacated in accordance with the 2022 shareholder vote.
Over many years, Ides has conveyed to Monro’s Board our numerous
concerns with its composition including our contention with fact
that the boardroom has remained largely homogenous and long-tenured
since the Company’s IPO. This scenario has potentially generated
significant risks and missed opportunities for Monro’s
stakeholders. After many conversations and shortly after Ides’ June
2020 letter to the Board directly addressing the need for a more
diverse director slate, Director Leah Johnson was nominated and
elected which, as we understand it, represents the first instance
of racial, ethnic or multicultural director diversity as well as
the first instance of two concurrently serving gender-diverse
directors in Monro’s approximately three decades as a publicly
traded company.
Not long after Ms. Johnson’s election, Ides discussed the
Board’s recruitment policies with Chairman Robert Mellor – a
conversation that prompted in Ides a second meaningful concern
about Monro’s boardroom. When asked to provide context around
director qualifications, Chairman Mellor cited the Class C
Preferred Holder’s long-term relationships with Monro’s directors
as the first “qualification” among an alarmingly short list of
prerequisites. It should go without saying that a long-standing
relationship with an existing fiduciary is not only not a
qualification, it is a red-flag for board service.
On multiple occasions and in a letter to the Board, Ides has
communicated our profound concern that Monro’s Board comprises “a
group where at least a majority of directors have deep ties to one
another outside of the scope of their service at Monro. These ties,
for example, include prior employment, advisory, non-Monro
boardroom and social relationships.” There have been no changes to
the Board’s composition since Ides penned that letter and, as our
observation was never affirmatively corrected by the Board, we can
only surmise that our troubling observation was and remains
accurate.
Which brings us to a third and, for the time being, final point
concerning new director recruitment at Monro.
With respect to the Board’s acknowledgement that significantly
more support and talent is not merely warranted but imperative, we
wholeheartedly agree, though we also take this opportunity to
address what we believe Monro shareholders will consider to be an
elephant in the Monro boardroom.
Apart from CEO Michael Broderick, it appears that there is not a
single, independent Monro director with automotive industry
experience.
Per the Company’s regulatory filings, Monro’s Board comprises
individuals with professional experience within the following
industries: eye care products, dog walking and pet sitting
businesses, industrial real estate, investment banking, non-profit
performing arts, private equity and art storage, amongst
others.
But, as far as we know and as far as is disclosed in the
Company’s proxy statements, not a single Monro director has had any
professional operating experience within the automotive
industry.
Remedying this glaring and confounding void in requisite
experience and expertise is the appropriate starting point in
Monro’s Board refreshment process. In light of our long-term
engagement and many concerns, including the three highlighted
herein, Ides believes that any efforts to retain new Monro
directors must be undertaken at an arms-length distance through the
retention of a director placement agency. Such an agency can also
assist Monro’s Board with the creation of a more appropriate skill
set, experience and attribute matrix. Moreover, this process should
incorporate input and feedback from the Company’s shareholders,
including Ides Capital.
Finally, Monro’s Board should promptly form a strategic review
committee tasked with two near-term objectives. First, the receipt
and review of potentially interested parties and prospective
offers. Second, the creation of a clear plan and path towards
better outcomes for shareholders including the disclosure of
performance and valuation objectives which will provide a baseline
of comparison for potential strategic initiatives and interest.
This committee should further be tasked with providing detail
around the far from “consistent” (as is the Company line) but
rather novel material risk factors related to the Class C Preferred
Shares as disclosed in Monro’s 2022 proxy statement and annual
report for the first time in the Company’s approximately
three-decade history as a publicly traded company filing
disclosures under the SEC’s reporting regime.
To review recent history, in 2021, 88% of Monro’s voting common
shareholders supported Ides’ proposal requesting that the Board
take steps to initiate a recapitalization plan. To date, the Board
has failed to meaningfully act.
In 2022, two of Monro’s incumbent directors were voted out by a
majority of voting common shareholders.
2023 is just around the corner and we believe that Monro’s Board
has reached a fork in the road. The Board can choose to overhaul
its worst-in-class corporate governance and take concrete action to
repair the breakdown in its fiduciary relationship with its common
shareholders. Or it can forgo the pomp and circumstance charade of
hosting a common shareholder annual meeting and instead host a
meeting that more accurately captures Monro’s corporate governance
dysfunction − an annual meeting attended by a single, preferred
voter.
Ides Capital does not hope but rather expects that Monro’s Board
will not resort to dallying around until next year’s annual meeting
to test out the veracity of whether “the third time’s the charm.”
Shareholders have made clear that the time for change at Monro is
now and Ides Capital stands prepared and committed to assisting
Monro’s Board in successfully delivering positive and more
inclusive outcomes for Monro’s stakeholders, including long-term
value creation for shareholders.
About Ides Capital Management
Ides Capital Management LP is a New York-based activist
investment advisor that engages with corporate boards and
management teams to drive long-term shareholder value, sustainable
change and inclusive outcomes at small and mid-capitalization
publicly traded companies.
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version on businesswire.com: https://www.businesswire.com/news/home/20220824005424/en/
Media: Longacre Square Partners Joe Germani / Miller
Winston jgermani@longacresquare.com /
mwinston@longacresquare.com
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