Proxy advisor Institutional Shareholder Services, (ISS) Monday recommended Huntsman Corp investors vote for two of Starboard Value’s director nominees to the 10-member chemical maker’s board.
ISS recommended that two Starboard directors be elected in order to better supervise management. The board failed for many years to hold management responsible for operational stagnation which resulted in a lagging stock market.
The report stated that James Gallogly, an ex-CEO of LyondellBasell Industries Industries, would help strengthen the board’s independence, and Jeffrey Smith (Starboard’s managing member) would offer the perspective of an independent shareholder.
ISS acknowledged Huntsman’s changes, which included adding new board members. It also noted that the share price has increased dramatically. Starboard had been pressing for changes, but ISS stated that some of these changes were only made after ISS.
On March 25, investors will vote.
Huntsman representatives were not available immediately to comment on the ISS Report.
The report stated that “Adding Gallogly and Smith will be the most cost-effective way to address management accountability concerns and ensure shareholders’ interests are prioritized.”
Starboard, which holds 8.6% of Huntsman’s stock, said that Huntsman failed to live up to its promises and would disappoint shareholders again if its nominees were elected.
Huntsman promised last year to increase margins, return $1billion to shareholders through share purchase, not spend more than $500m on one acquisition, and manage a sales process for non-core Textile Effects units.
The ISS report was issued one day after Glass Lewis, a smaller advisory firm recommended that shareholders re-elect Huntsman’s nominees. Glass Lewis analysts said that Huntsman is on the right track, and they don’t see any need to make changes.
Starboard is looking to replace Cynthia Egan (lead independent director) and Jose Munoz (who joined the board in this years. Starboard is also looking at Mary Beckerle and Daniele Ferrari as directors with conflicts.
ISS stated that Beckerle was a highly skilled cancer researcher, but that there were concerns about her independence from Peter Huntsman (the founder’s son and CEO). ISS stated that Jose Munoz was “unproven” as a director.