Round 2: “Duking it Out in the Boardroom”…

March 26, 2010

In Round 2 of —Duking it Out in the Boardroom, we focus on the directors’ spat at Ohio-based Myers Industries, Inc. (MYE). Founded in 1933, the company has grown into what it now describes as —an international manufacturer of polymer products for industrial, agricultural, automotive, commercial, and consumer markets.

The disagreement involves Stephen E. Myers, who joined his family’s company many decades ago and eventually became the Chairman and CEO. He retired/resigned from that position in May, 2005. According to the annual report that the corporation filed a couple of weeks ago, Myers still owns 7.84% of the company’s outstanding common stock.

Now almost five years later, Myers resigned from the board by sending a letter dated March 10, 2010 (it’s an exhibit to this 8-K) which stated that his departure stemmed from his —continuing disagreement with the Board over a number of important practices and policies. I feel that the Board’s continued unwillingness to consider my views on these matters, as evidenced by its decision not to include me in management’s slate of nominees for the upcoming meeting, leaves me no other choice.

Myers listed several complaints about the way the company is being run, including (to name just a few) the board’s ——preoccupation—to increase its compensation without linking the increases to performance; —the adoption of governance practices that hinder shareholders— ability to voice their legitimate concerns both to the Board and to other shareholders within the forum of the Company’s Annual Meeting—; and —the Board’s concern with unanimity and its intolerance of divergent opinion within or without its ranks.

The company responded to the issues Myers raised with its own letter dated March 16, 2010. It stated that it “has not increased its compensation” for independent directors since 2005 (and that the “compensation for independent directors at Myers Industries, Inc. fell well below the total compensation paid to directors at comparable peer companies”). It also said that its adoption of advance notice requirements in order for shareholders to nominate directors or new shareholder proposals had been —a legitimate exercise of the authority granted by our shareholders at last year’s meeting and permitted by Ohio corporate law, and that Myers— —views and opinions have always been valued and considered, even when divergent from those of other members of the Board. (It also addressed the other issues Myers raised.)

Two days later, Myers sent another letter (an exhibit to this 8-K) which notes: —I—ve put a considerable portion of my life into the company, a fact that drives my concern about Board processes which effect the direction of the Company and necessitates my response to several comments in your letter that take on a personal tenor and/or are not responsive to statements I made in my letter of resignation.

Myers points out that the increase in director compensation had not been in cash, but in —outright annual grants of 1000 shares of Myers stock. (Page 12 of the 2010 proxy indicates that non-employee directors do get a grant of 1000 shares if they’ve served since the prior year’s annual meeting.) And then he writes:

Since the Company became publicly owned in 1971, no Director of the Company has left because of inadequate compensation. There appears to be no problem in attracting qualified directors to the Board as exemplified by the introduction of a new director to the board in four of the last five years. I see no profit in paying an expensive consultant to provide information that a mid-level clerk could research in half-a-day—. It is not productive use of Directors— fees or time to worry about what other directors earn. That the Board cites the commission of Towers Watson to do such work, an unproductive and irrelevant use of the shareholders— money, confirms my assertion.

By alerting readers to disputes like this one (and the one yesterday at BioMarin Pharmaceutical, Inc.), we’re not attempting to determine which side in these disputes is “right.

We are, however, suggesting that shareholders of these companies (and companies in similar situations) would be wise to study the filings and correspondence for themselves. (And in the case of Myers— shareholders, perhaps they’ll want to attend the upcoming annual meeting scheduled for April 30, 2010.) Ultimately, it’s the shareholders who have the most at stake in these disputes.

Image source: Claudiogennari via Flickr

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