Second Proxy Advisory Firm Rejects Image Board5 Oct, 2006 By: Erik Gruenwedel
Glass, Lewis & Co., a San Francisco-based proxy voting advisory firm, Oct. 5 recommended Image Entertainment shareholders not re-elect the Chatsworth, Calif.-based distributor's seven-member board of directors.
Instead, the proxy firm recommended shareholders vote for UCLA economics professor Duke Bristow and Barry Perlstein — two of six nominees submitted by Image's second-largest shareholder, Lionsgate.
Santa Monica, Calif.-based Lionsgate has twice unsuccessfully attempted to acquire Image.
Last week, another proxy advisory firm, Institutional Shareholder Services, recommended the election of Bristow and denied support for Image's incumbents, who include chairman and CEO Martin Greenwald.
Image will hold board elections Oct. 10 in Woodland Hills, Calif.
In its report, Glass, Lewis accused Image's board of presiding over an “extended period of poor operating performance” and believed it had taken “a lackadaisical approach” toward reviewing strategic alternatives.
“Investors should be troubled by the board's willingness to negotiate significant share issuances prior to the conclusion of [a] strategic review,” said the report, in reference to a distribution deal with Relativity Media and separate convertible debt offering that resulted in Image issuing a sizable number of shares.
Image executives have repeatedly said issuance of the stock would not be included in next week's elections.
The report also said Image's net income fell in fiscal 2005 and 2006, and its revenue and pre-tax earnings growth in fiscal 2006 were negative.
“The fact that the two leading independent proxy advisory firms … both recommend that Image stockholders not vote for any of Image's current board members, underscores the need for change at Image,” said Lionsgate vice chairman Michael Burns.
A representative from Image declined comment.
Earlier this week, Greenwald blamed Lionsgate's hostile acquisition tactics for its fiscal woes.