Concerned Shareholders Submit Proposals for Board Reform at Sherritt International Corporation
HALIFAX, March 20, 2014 /CNW/ - Concerned Shareholders led by Clarke Inc. (TSX: CKI CKI.DB.A) today submitted four Shareholder Proposals designed to protect investors from further ill-considered acquisitions and to reform excessive and inappropriate compensation practices at Sherritt International Corporation ("Sherritt").
All Sherritt shareholders will have an opportunity to vote on the proposals at the Company's Annual and Special meeting to be held on May 6, 2014.
The Concerned Shareholders of Sherritt collectively own more than 5.0% of the outstanding common shares of Sherritt. Separately, on December 20, 2013, Clarke Inc., on behalf of the Concerned Shareholders, requisitioned a special meeting to allow Sherritt shareholders to vote on the removal of certain directors and their replacement by new directors who can better represent the interests of all the Company's shareholders.
"The proposals we have submitted today are all consistent with accepted best practices in Canadian corporate governance and are intended to help align the interests of Sherritt's Board of Directors with shareholder interests," said George Armoyan, President and Chief Executive Officer of Clarke Inc. "Particularly in the absence of true shareholder representation on the Sherritt Board, all of these steps should have been taken by the current Board of Directors on its own initiative, but it has failed to act."
The Shareholder Proposals will be included in Sherritt's Management Information Circular to be disseminated before the annual and special meeting. In summary, they are:
1. Approval of Acquisitions: Amend the Company's by-laws to require that any material acquisition must be unanimously approved by all Directors.
The Concerned Shareholders note Sherritt's dismal track record in capital allocation and lack of consistent strategic direction. One example is the coal business which was sold, reacquired and sold again, with the recent sale resulting in an impairment of $519 million and costing the shareholders approximately $1.75 per share. Similarly, the Board committed to spend $110 million on its Sulawesi nickel project only to abandon it as uneconomic three years later.
2. Director Compensation: Urge the Board to seek shareholder views on Director compensation through an advisory vote.
"Say on pay" for executive management is increasingly accepted as a right of shareholders. The Concerned Shareholders believe it is only logical to extend this concept to Boards of Directors since they are directly responsible to shareholders. It is particularly needed at Sherritt where, in 2012, the Directors were paid a total of $3.7 million which is an average of more than $400,000 per Board seat. That is certainly among the highest director compensation in Canada and is almost twice the average of the companies Sherritt describes as its peers, most of whom are larger and more successful.
3. Executive Compensation: Urge the Board to seek shareholder views on executive compensation through an advisory vote.
The Chief Executive Officer at Sherritt was paid a total of $2,772,501 in 2012. That year, he led the Company to a 20% decrease in EBITDA and a 24% drop in cash flow from operations, significantly underperforming Sherritt's peers. The Concerned Shareholders believe compensation should be tied to performance.
The current Board and Management own less than 0.25% of Sherritt's common shares and receive the great majority of their compensation as cash. They have effectively no financial interest in the success of Sherritt and their interests are not aligned with the interests of shareholders. The Concerned Shareholders believe the Board and Management should share in the risks as well as the rewards of the business.
4. Special Perquisites for Directors: Advise the Board to stop authorizing special perquisites for directors that do not align with shareholders.
Sherritt's Board paid itself more than $1.5 million in 2012 in compensation for restrictions to travel in the U.S. under the Helms-Burton Act, even though the majority of the current Directors have not been restricted from travelling to the U.S.
It is also simply inappropriate for shareholders to pay travel and other expenses for the spouses of Directors and management. It is a luxury an underperforming company cannot afford, particularly when the compensation paid to the Board and certain executives is already excessive and the spouses are not contributing to the direction of Sherritt.
"Each of these proposals can help transform Sherritt from a private club, apparently run for the benefit of the Board of Directors, into a properly governed public company managed for the benefit of all its shareholders," Mr. Armoyan said.
The Concerned Shareholders also announced that they will, in due course, file a Proxy Circular describing their reasons for the need for change at Sherritt and the plans they will recommend to the Board.
This news release does not constitute a solicitation of proxies.
About Clarke Inc.
Halifax-based Clarke invests in a variety of private and publicly-traded businesses and participates actively where necessary to enhance performance and increase its return. Clarke's securities trade on the Toronto Stock Exchange (CKI; CKI.DB.A); for more information about Clarke, please visit our website at www.clarkeinc.com.
Note on Forward-Looking Statements and Risks
This press release may contain or refer to certain forward-looking statements relating, but not limited to, the Company's expectations, intentions, plans and beliefs with respect to the Company. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "does not expect", "is expected", "budget", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or equivalents or variations, including negative variations, of such words and phrases, or state that certain actions, events or results, "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved. Forward-looking statements include, without limitation, those with respect to the future price and value of securities held by the Company, changes in these securities holdings, changes to the Company's hedging practices, currency fluctuations, requirements for additional capital, changes to government regulations, and the timing and possible outcome of pending litigation. Forward-looking statements rely on certain underlying assumptions that, if not realized, can result in such forward-looking statements not being achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements.
With respect to the Company's Investment segment, such risks and uncertainties include, among others, the Company's investment strategy, legal and regulatory risks, general market risk, potential lack of diversification in the Company's investments, interest rates and foreign currency fluctuations and other factors. Other general risks and uncertainties include, among others, the sale of Company investments and subsidiaries, dividends are not guaranteed, share liquidity, reliance on key executives, environmental considerations, use of information technology and information systems, commodity market risk, risks associated with investment in derivative instruments and other factors.
Although the Company has attempted to identify important factors that could cause actions, events or results not to be as estimated or intended, there can be no assurance that forward-looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Other than as required by applicable Canadian securities laws, the Company does not update or revise any such forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events. Accordingly, readers should not place undue reliance on forward-looking statements.
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