By Svea Herbst-Bayliss
NEW YORK (Reuters) – Two influential proxy advisory firms are backing activist Politan Capital Management’s quest for two board seats at Masimo , arguing the candidates would bring experience and perspective to the medical device maker’s five-person board.
Glass Lewis on Thursday urged Masimo shareholders to elect Michelle Brennan and Quentin Koffey, Politan’s founder and chief investment officer to the board at the annual general meeting scheduled for June 26.
Institutional Shareholder Services, Glass Lewis’ larger peer, on Tuesday made the same recommendation in what is shaping up to be one of the biggest and most contentious board room battles of the year.
Politan, which owns 9% of Masimo’s shares, has long criticized the company’s capital allocation and board oversight and expressed particular concern about last year’s $1 billion purchase of consumer audio device maker Sound United.
Last year Politan’s campaign made huge headlines in the corporate governance world when Masimo, in an effort to defend itself against the hedge fund, adopted bylaws that would have required anyone nominating directors to identify their own clients and to say if they planned to nominate directors elsewhere.
Activist hedge funds feared other companies might adopt similar rules forcing them to disclose top secret information and corporations flocked to their lawyers to ask whether they too should implement these rules. In the end, Masimo reversed course and dropped the requirements after Politan sued in Delaware court.
Masimo, which is valued at $8.5 billion, has made clear that it wants to keep Koffey off its board, fearful the veteran activist might push to remove Joe Kiani, the company’s founder and chief executive officer. The company has said Koffey has not come up with any operational or strategic ideas since Politan invested and that he threatens to hurt Masimo’s culture and create chaos in the boardroom, hurting shareholders.
Politan has said it is fully aligned with the success of the company and its ability to generate long-term value and has expressed concerns about the small size of the board and the company’s failure to make good on pledges to expand the size previously.
Earlier this month, the company proposed to expand the board by one and invite Michelle Brennan, a former healthcare industry executive who is not directly associated with Politan, if shareholders backed the company’s two candidates and did not elect Koffey.
It plans to expand the size from five to seven in the future and have every director stand for election annually. This year only two directors are up for election.
Glass Lewis wrote that Politan’s campaign has already created positive change for shareholders but more needs to be done. “Koffey will instill greater accountability, capital allocation discipline and credibility with investors, all of which are unmistakably lacking currently, in our view,” the Glass Lewis report said.
(Reporting by Svea Herbst-Bayliss; Editing by Cynthia Osterman)
