Proxy advisor ISS endorsed the Burkle party and its proposal to amend the poison pill in the Barnes & Noble (BKS) board election:
…based on BKS’ deteriorating operating performance, poor shareholder return, less-than-enthusiastic analyst recommendations, inadequate…disclosure on a very large related-party transaction…and significant concerns about unusual pay practices, we believe the dissidents have demonstrated a compelling case that change in the BKS board is warranted.
Of modern Wall Street’s sins, the one Benjamin Graham would never forgive is listening to a proxy advisor.
The institutions that are listening are hearing static. Glass Lewis endorsed Riggio. ISS endorsed Burkle. Here’s what Barnes & Noble said: “While ISS has a track record of supporting dissidents, we believe its analysis is flawed and not in the best interest of our shareholders.”
While that sentence is flawed – what’s the word “while” doing in there – we get their point. Is it true? Does ISS have a track record of supporting dissidents? No. ISS has a track record of supporting dissidents more than Glass Lewis. But both advisors usually support management. Glass Lewis supports dissidents 20% of the time. ISS supports dissidents 40% of the time.
When ISS and Glass Lewis recommend voting for the same party, that party usually wins. What about a split decision? ISS and Glass Lewis have disagreed 21 times since 2006. Management won 33%. Dissidents won 43% outright and 14% in part. 10% were settled before the vote.
All splits were: Glass Lewis for management; ISS for dissident.