Institutional Shareholder Services (ISS), an independent proxy advisory firm, has recommended that Argo Group shareholders vote against board nominations put forward by 5.6 percent shareholder Voce Capital Management amid an ongoing dispute about Argo's corporate expenses.
On May 24, 2019, Argo will hold its annual meeting of shareholders, where they will vote on either Argo or Voce’s director nominees to sit on Argo’s board.
ISS' recommendations were supported by Argo delivering "strong TSR (total shareholder return) over the short- and long-term", and demonstrating "good overall governance", having "appropriately refreshed itself in recent years".
Furthermore, ISS suggested that Argo's board had "thoughtfully considered many of the concerns raised by the dissident before reaching a conclusion with which the dissident disagrees".
The advisory firm commented: "In fact, independent of the dissident's involvement, the board's refreshment is proceeding at a reasonable pace and the dissident's allegations of a stale Board do not appear to accurately reflect the current Board dynamic, particularly in the absence of underperforming operations or share returns."
In response, activist shareholder Voce called ISS's comments "baffling", "erroneous" and "lopsided", suggesting the focus on TSR should not be as paramount and decisive as implied by ISS's report.
Voce said: "We have acknowledged from the beginning that Argo’s stock price has appreciated over time. If that’s the end of the inquiry, as it appears to have been for ISS, then with all due respect, there’s no need for a third-party to analyze or weigh in on this proxy contest. The far more relevant questions are why has Argo’s stock performed the way that it has, should it have done better and can it improve going forward?"
The activist shareholder added: "ISS’s commentary acknowledged Argo’s inflated expense structure, lack of adequate disclosure to investors, cherry-picking of metrics, misaligned executive compensation and the risks represented by the comingling of the CEO’s self-promotion and the Company’s marketing – yet apparently none of the following conclusions by ISS were sufficient to warrant the replacement of even a single legacy director with one selected by shareholders."
Argo has since welcomed the recommendation, and urged shareholders to discard any proxy cards sent to them by Voce.
Gary Woods, independent chairman on Argo's board, commented: “We value the support of ISS, which recognises the strength of our Board’s nominees and our commitment to increasing shareholder value. Our strategy of focusing on profitable underwriting and relationships, portfolio investment and disciplined capital allocation is driving strong performance."
Woods continued: "ISS’ recommendation underscores the importance of an orderly process for Board refreshment, which provides stability to the company's business and supports our commitment to best-in-class governance.”
ISS, Argo, Voce, Bermuda