Proxy Firms Recommend Against Biglari
The third time should not be the charm for Sardar Biglari, at least according to a trio of proxy advisory firms.
ISS, Glass Lewis and Egan-Jones, the three proxy advisory firms whose recommendations carry significant weight with institutional investors in proxy votes, all recommended against the investor Biglari's most recent effort to gain seats on the Cracker Barrel board of directors. Biglari has nominated himself and Phil Cooley, the vice chairman of Biglari Holdings, for seats on the highwayside chain's board. Big failed in two previous efforts.
In fact, Glass Lewis called this "perhaps the least compelling" of Big's three efforts to gain board seats. Biglari owns nearly 20 percent of Cracker Barrel stock through Biglari Capital, which handles the investing for Biglari Holdings, owner of Steak N Shake.
Of course, we think Big was unlikely to get those seats in the first place, and that his real target is the $20 dividend. But he got nowhere on that front, too. In its report, ISS said that Biglari has "not offered a compelling argument that the (Cracker Barrel) board is making poor capital allocation decisions."
Glass Lewis even questioned Biglari's own corporate governance structure. "We believe investors should reasonably consider the dubious corporate governance principles promulgated by Biglari when considering the prospective appeal of electing either of Messrs. Biglari or Cooley."
As Cracker Barrel has noted, Big twice sought, and failed to receive, shareholder approval of a dual-class share structure at Biglari Holdings, before he finally succeeded at getting a rights offering. In addition, only 33 percent of Biglari Holdings shareholders approved Biglari's pay in the non-binding "say on pay" advisory vote held at the company's last shareholder meeting. That's a low percentage, suggesting considerable shareholder dissent with Big's pay package.
The advisory firms' recommendations are important, because they are almost like newspaper endorsements in an election -- if readers actually paid any attention to those endorsements. A recommendation one way or the other by ISS or the other firms can make or break a proxy vote. So the recommendation against the dividend proposal doesn't bode well for Big this time around.