Proxy advisory firm Institutional Shareholder Services announced on Wednesday that it is supporting billionaire investor Carl Ichan’s proposal to join Motorola Inc.’s board. While, rival advisory firm Glass Lewis, however, backed the present line up of directors, arguing that Icahn has been unsuccessful to draw out a convincing plan on improving Motorola’s business. The recommendations come ahead of Motorola’s annual shareholder meeting scheduled for May 7. Icahn is trying to extract some control of the company from Chief Executive Ed Zander, who at present is facing immense pressure to turn the company around.
Institutional Shareholder Services in its report argued, ‘Because (Motorola) appears to be at an important inflection point with significant uncertainty about the company’s current plan, we believe the presence of a new viewpoint may help to ensure that shareholder value is preserved’. On the contrary, advisory firm Glass Lewis is of the view that the company management has recognized ‘previous errors in judgment’ and is taking action to improve the company’s business. This stance largely reflect that it is still backing the current set up of board of directors and reluctant to any change in it.
What seems to be a modest refusal to include Icahn, Glass Lewis though acknowledged that Icahn rightly identifies a number of problems with Motorola’s business and misjudgments by its managers and board, but they felt in their report that the dissident’s plan for improving Motorola’s current position is short on details. In the meanwhile, Motorola’s management has advised shareholders to vote against Icahn, on the ground that his commitments on other boards would distract him from concentrating on the firm. They also said that he has no expertise in the company’s business.
Motorola has recently drawn flakes from its investors this year as sales of its high-end handsets have drastically gone down. At the same time, its famous Razr line no longer commands a price premium. The company is taking various measures to regenerate the handset business with new products and more efficient manufacturing. However, experts have expected a bounce-back will not take place until later this year at the earliest.
Earlier, Icahn had said in January that he was in quest of a board seat at Motorola, which has struggled in recent quarters with weak cell phone sales that caused it to report a first-quarter loss. Icahn had also said that his goal was for Motorola to do a big share buyback. However last week, after the company had released a weaker than projected outlook for the year, he adjusted his position, saying that fixing Motorola’s operational problems took precedence over repurchasing shares.
Icahn, the 42nd richest man in the world, was apparently trying to get one of 13 seats on the board since March, when he increased his stake in the company to 64.4 million shares of Motorola, or 2.7 percent of those outstanding. Later on, Icahn raised his stake in the company to 69.1 million shares, or 2.9 percent. Then Icahn had written to Motorola saying he and his investing affiliates control nearly 3 percent of Motorola stock, therefore, he is entitled to a board seat. However, Motorola management has already indicated it will resist the Icahn effort.
Now concerned parties are locked in a fierce battle on the question of taking Icahn on Board. Motorola has said Icahn is not qualified to sit on its board due to a lack of industry-specific experience, while ISS argued that other board members also had ‘little knowledge’ of Motorola before joining its board.
