IEC's Top Shareholder Calls for Board Overhaul
NEWARK, NY -- IEC's largest shareholder is taking aim at what it says is the EMS's management's "direct violation of [its] fiduciary duties to stockholders."
In a letter dated Aug. 14 to chairman and chief executive Barry Gilbert and the IEC board, Vintage Capital Management called for wholesale changes among the company's directors. In the letter Vintage complained that the board has disregarded its responsibility to its shareholders, citing a "commitment to poor governance" and IEC's adoption of a "poison pill" as the final straw.
Vintage, a Florida-based private equity group, owns about 7.1% of the outstanding shares of IEC.
In the letter, Vingate says it has given IEC's board "latitude" for its acquisition of Southern California Braiding in December 2010. The subsequent integration of SCB has been a drag on IEC's earnings and it continues to restate its finances due to accounting errors at the subsidiary.
The highly charged letter called IEC "excuse-laden," "[unable] to grow," and guilty of generating "unacceptable stockholder returns."
"We have assumed that your complete lack of transparency, gamesmanship and bizarre evasiveness on quarterly earnings calls were driven by genuine concern for stockholders and not merely a desire to hide from them. It now appears that we gave management and the board of directors the benefit of the doubt for too long."
Responsing to IEC's decision to adopt a tax benefit preservation plan without a shareholder vote, Vintage called it "nothing more than a thinly disguised poison pill" and "a blatant effort to entrench the board and management in direct violation of your fiduciary duties to stockholders."
"The decision to adopt a poison pill only furthers our belief that IEC would benefit substantially from new directors who are able to bring a fresh perspective to the board of directors. With an average tenure of over 11 years and one-third of the board with a long tenure of over 20 year, we believe that it is long past due for significant change on the board," Vintage wrote. It said it would monitor the company's response and cautioned the board against taking "further entrenchment actions."
