Darden Issues Open Letter To Shareholders
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Dear Darden Shareholder:
We are writing to you today regarding Darden's upcoming 2014 Annual Meeting of Shareholders, which will be held on
SUBSTANTIAL AND POSITIVE CHANGE IS UNDERWAY.
WE HAVE BEGUN A SEARCH FOR A NEW CHIEF EXECUTIVE OFFICER.
WE HAVE RECONSTITUTED DARDEN'S INDEPENDENT BOARD SLATE, WITH 8 OF 12 INDEPENDENT DIRECTORS NEW THIS YEAR.
As you are aware,
<p>The composition of your Board is something we take seriously; the experience and expertise of your directors have been, and will continue to be, drivers of the Company's success. We also value our shareholders' views. Thus, we have been speaking directly with many Darden shareholders to hear first-hand what they think about the future leadership of your company.
We understand that while many shareholders recognize Darden's record of long-term performance and value creation, they are also disappointed with the Company's recent performance. In addition, we appreciate that while many of our shareholders believe in the importance of having a board and leadership team who have a deep understanding of the Company and its strategic shifts over time, they also believe that Darden would benefit from new perspectives. We also recognize that many Darden shareholders have concerns about the risks and destabilization that would result from a full Board turnover and giving control to a single shareholder's nominees, particularly given the positive momentum we are achieving across our brands, including Olive Garden®.
The Darden Board is committed to looking at the Company with a fresh perspective and recently announced a new slate that aligns with that priority. It is a slate that includes four new, highly qualified independent nominees unaffiliated with the Company or Starboard, all of who have served as CEOs of major companies; four returning director nominees, all of who are committed to the positive change Darden is undertaking and to working constructively with the other members of the reconstituted Board; and four seats to be filled by candidates proposed by Starboard. Under this reconstituted Board, eight of Darden's 12 independent directors would be new to the Board this year. We encourage you to read the additional details about Darden's director nominees and their qualifications at the end of this letter.
Following the upcoming Annual Meeting, the Board will elect a new independent Board chair and will also reconstitute all of the Board's committees, continuing the full revamp of Darden's corporate governance structure.
Darden's new slate, together with the previous announcement that Darden has initiated a search for a new Chief Executive Officer, is significant and meaningful change to the leadership of your company. This change is consistent with what we believe is in the best interest of all Darden shareholders, and it is consistent with our record of taking action to best position Darden for continued improvement and success.
DARDEN HAS ALSO MADE CHANGES TO EXECUTIVE COMPENSATION AND INCENTIVE PROGRAMS TO BETTER ALIGN WITH SHAREHOLDER INTERESTS.
As part of the changes to our strategic direction that we announced last year (prior to Starboard's involvement), the Board and its independent Compensation Committee, following consultation with shareholders, significantly amended compensation and incentives for senior management to more directly emphasize same-restaurant-sales growth and free cash flow and create further alignment with shareholder priorities. We are pleased that these changes have been well received by our shareholders and industry analysts since we announced them in December[1]:
- "Senior management's compensation/incentive programs are being refined to focus on same-store sales growth and the generation of free cash flows. We believe this is positive as incentives should be more aligned with those of shareholders." (
Sterne Agee , 19-December-2013) - "Darden has made the strategic decision to realign management compensation to be more correlated with comp growth and free cash growth, versus sales and EPS growth previously. Comp growth correlation will hold management accountable for near-term performance while free cash flow growth over time will align compensation with the long-term success of the portfolio." (Barclays, 19-December-2013)
- "[W]e applaud management's recognition of the need for increased brand focus, changes to compensation, and overarching prioritization of FCF return vs. growth in what is now a mature industry" (J.P. Morgan, 20-December-2013)
OUR OPERATING INITIATIVES ARE DELIVERING RESULTS.
BRAND PERFORMANCE, INCLUDING AT
DARDEN'S NEW SLATE AVOIDS RISKS TO THIS PROGRESS AND AVOIDS THE DESTABILIZATION THAT WOULD RESULT FROM THE FULL BOARD TURNOVER THAT STARBOARD IS SEEKING.
Darden's new slate provides shareholders with the benefits of new perspectives as well as continuity of experience and expertise. By providing seats for four of Starboard's nominees on the new Board, the Darden slate also provides Starboard with a meaningful opportunity to participate in the decisions regarding Darden's strategic direction, including the selection of the Company's next Chief Executive Officer.
Like many Darden shareholders, we are concerned that replacing the entire Darden Board, as Starboard is seeking to do, would create a void in constructive leadership that would be significantly destabilizing to the Company. Indeed, we believe that this disruption would come at the worst time given the early progress we are seeing on the Olive Garden Brand Renaissance, as recently reported, and the growth trajectory of our other brands, including
In our view, such immediate, wholesale change, as advocated by Starboard, ignores the risks associated with a Board that has no direct knowledge of Darden's current operations and the substantial actions underway to improve performance. Given the positive momentum we are achieving in Darden's operations, we believe it would be detrimental to your company and the value of your investment to delay the actions we are taking so that an entirely new Board could get up to speed.
Darden's foundation is our people – over 150,000 in number – and the ability of our team to provide the service and quality our guests expect. Our Board is concerned that creating a climate of uncertainty regarding the Company's leadership and strategic direction – which we believe would be the case if all of Darden's directors were removed – would rattle this foundation, disrupt our ability to continue executing on our goals and ultimately negatively impact our guests.
In recognition of the significant risks associated with a full turnover of Darden's Board that Starboard is seeking, as well as the distraction and costs associated with Starboard's proxy contest, we have made numerous attempts to reach an agreement with Starboard that would enable us to avoid this proxy contest.
However, Starboard has, to date, rejected the proposals we have made. We are disappointed that rather than work with us to achieve a mutually acceptable resolution that serves the interests of all Darden shareholders, Starboard remains set on pursuing its costly and disruptive proxy contest to take control of your company. In doing so, Starboard appears to be putting its interests ahead of your own. By attempting to replace all 12 members of Darden's Board with its own preferred nominees, Starboard is seeking effective control of the Company – representation which is disproportionate to Starboard's approximate 8.8% stake in Darden and which does not offer Darden shareholders a control premium for such change in control.
NEW SLATE PROVIDES FRESH PERSPECTIVES AND CONTINUITY OF EXPERIENCE FROM HIGHLY QUALIFIED INDEPENDENT NOMINEES.
Darden's slate of director nominees includes highly qualified individuals to support the development, oversight and execution of Darden's operating and brand initiatives, including the turnaround of
The Company's four new independent nominees, all of whom are current or former Chief Executive Officers, strengthen Darden's slate with additional international restaurant, franchise, consumer, real estate and operations expertise.
Three of these new independent nominees –
These four new independent nominees will complement Darden's four returning directors, who provide important and deep understanding of Darden's operations and the shifts in industry and consumer trends over time. By joining this knowledge base with the fresh ideas and new perspectives provided by the four new independent directors on our slate, we believe we can accelerate the progress we are making to improve performance across our brands and enhance shareholder value. Darden's returning directors are committed to bringing their knowledge of Darden to the reconstituted Board and look forward to working closely and constructively with all eight of Darden's new directors to realize these objectives.
All of Darden's nominees have proven records of value creation, and all bring skills and insights that we believe will help fortify Darden's position as a premier full-service restaurant company, including experience:
- Leading global consumer and retail companies with skill sets in operations, food service and restaurants, hospitality, consumer marketing/brand building, supply chain and distribution management, and consumer packaged goods;
- Developing and successfully executing significant corporate turnarounds through operational improvements, increased financial discipline and exiting of non-core businesses;
- Optimizing asset portfolios through franchising, real estate development, and mergers and acquisitions, with many of Darden's independent directors directly overseeing or guiding the strategic direction of substantial real estate portfolios;
- Serving as senior executive leaders at other publicly traded companies, including in the roles of Chairman, Chief Executive Officer, Chief Operating Officer, as well as serving in Board committee leadership roles and as individual directors; and
- Developing strategies and policies in other key areas, including technology, human resources, and corporate governance.
The leadership of these director nominees is complemented by Darden's deep management team, including Darden's President and Chief Operating Officer,
WE HAVE TAKEN IMPORTANT STEPS TOWARDS A NEW, IMPROVED DARDEN.
Your company has revamped its governance and oversight structure with a Board that will include eight of 12 directors new this year and only four continuing directors. Your company has initiated a search for a new Chief Executive Officer, which will be overseen by the new Darden Board. Following this election, your company's Board will also have a brand new independent Chairman. This is real, meaningful and substantial change.
As one of the Company's largest shareholders, we support Starboard's representation on the Board, which is why we have provided one-third of the Board seats for Starboard's candidates. However, we caution shareholders not to overcompensate for the Company's recent performance by ceding total control to Starboard which is not paying shareholders a control premium.
This election will give shareholders the opportunity to pick the directors that shareholders believe will build long-lasting value by representing the interests of ALL Darden shareholders.
SUPPORT THE PROGRESS WE ARE MAKING.
SUPPORT A BALANCED SLATE THAT SERVES THE BEST INTEREST OF ALL DARDEN SHAREHOLDERS.
Darden's director nominees are proven leaders in their respective fields with knowledge and expertise relevant to the needs of the business and the Company's strategies. With the addition of four new independent nominees unaffiliated with the Company or Starboard, and four nominees proposed by Starboard, Darden's slate also provides fresh perspectives and meaningful representation for Starboard. Together with a new Chief Executive Officer, the search for whom is underway, this is real change for your company.
We urge you to support this change and continued progress on Darden's operating priorities by rejecting Starboard's efforts to take control of Darden by replacing all 12 members of the Board with its own preferred nominees and without paying a control premium.
On behalf of Darden's Board of Directors, thank you for your continued support.
Sincerely,
/s/
Independent Non-Executive Chairman of the Board
About Darden's Four New Independent Nominees
Under
Prior to joining Convergys,
Prior to Alltel,
Previously
Previously,
Since joining the Company in 2007,
Prior to Checkers,
About Darden's Four Incumbent Independent Nominees
The success of these strategies is reflected in the value created by the companies in which
In addition to his strategic achievements as CEO of the
- Operating profit more than doubled with significant gains across operating segments, including Retail,
- Supply chain was enhanced with improvements in innovation, pricing and plant automation, which resulted in significant cost reductions and increased efficiencies;
-
- The Company restructured all divisions and optimized its brand portfolio through the acquisition of new brands and the sale or shutdown of non-core assets.
Over the course of his executive leadership career as Chairman and Chief Executive Officer of other companies,
- The successful turnaround of a leading regional financial institution through recruiting a new management team, the sale of non-core businesses, completing significant debt refinancings and capital raises, and employee and community engagement;
- The growth of The Promus Companies (an owner of hotels operating under the Embassy Suites,
- The growth and spin-off of Harrah's
- The growth and expansion of
-
In light of his many accomplishments and track record in the hospitality industry,
Prior to
In addition to serving on the Board of
About
Information About Forward-Looking Statements
Forward-looking statements in this communication regarding our ability to accelerate the improvement of performance across our brands and enhance shareholder value and all other statements that are not historical facts, including without limitation statements concerning our future economic performance, plans or objectives and expectations regarding the sale of
Important Additional Information
The Company, its directors and certain of its executive officers are participants in the solicitation of proxies from stockholders in connection with the Company's 2014 annual meeting of stockholders (the "Annual Meeting"). Information regarding the names and interests of such participants in the Company's proxy solicitation is set forth in the Company's preliminary proxy statement, filed with the
The Company will be mailing a definitive proxy statement and proxy card to the stockholders entitled to vote at the Annual Meeting. WE URGE INVESTORS TO READ ANY PROXY STATEMENT (INCLUDING ANY SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS THAT THE COMPANY MAY FILE WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Stockholders will be able to obtain, free of charge, copies of any proxy statement and any other documents filed by the Company with the
[1] Permission to use quotations in these materials was neither sought nor obtained.
[2] As of
SOURCE
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