Star Equity Fund Responds to Proxy Reports for Gyrodyne, LLC
16 Agosto 2022 - 2:30PM
Star Equity Fund, LP (“Star Equity Fund” or “we”), a 5% shareholder
of Gyrodyne, LLC (Nasdaq: GYRO) (“Gyrodyne” or the “Company”),
advocates for improved corporate governance and enhanced
shareholder value at its portfolio companies. To that end, Star
Equity Fund previously issued two press releases detailing our
concerns about Gyrodyne. Recent reports from the proxy advisory
firms Glass Lewis & Co., LLC (“Glass Lewis”), and Institutional
Shareholder Services (“ISS”) reaffirm Gyrodyne’s continued track
record of poor corporate governance. We believe the apathy of
Gyrodyne’s incumbent board of directors (the “Board”) has been a
root cause of shareholder value destruction.
We have already identified many aspects
of poor corporate governance concerning the Gyrodyne
Board, as disclosed in our previous press releases dated
March 23, 2022, and August 1, 2022. Specifically:
- In March, we
emphasized our concerns with the Board’s bonus plan in the event of
liquidation and announced our intent to nominate director
candidates for the upcoming election. To our disappointment, and
likely as a response to our press release, Gyrodyne’s Board amended
the bonus plan in its 10-Q filed on May 11, 2022, to restrict its
alteration and ensure their compensation even in the case of failed
reelection. Additionally, Gyrodyne rejected our request to waive
the requirement of holding $2,000 worth, or 1%, of common stock for
at least a year.
- In our August
press release, we announced our intentions to vote WITHHOLD on the
re-election of Paul L. Lamb and Richard B. Smith to the Board. In
this release we expressed our views that the Board is running the
Company for their personal benefit, collecting compensation while
delaying the dissolution of the Company, guaranteeing an exorbitant
bonus plan, having no requirement for executive ownership in the
company, and not responding to shareholders’ continued concerns of
poor corporate governance.
Glass Lewis and ISS independently raised
similar concerns:
Both Glass Lewis and ISS independently came to
many of the same conclusions of poor corporate governance at
Gyrodyne within their recently issued reports, published on August
1, 2022, and August 5, 2022, respectively. These reports analyzed
the proposals for consideration at the upcoming Gyrodyne annual
meeting of shareholders including: the election of directors Paul
L. Lamb and Richard B. Smith, the advisory vote on Executive
Compensation, and the ratification of an independent auditor. Both
firms recommended shareholders vote WITHHOLD on the re-election of
Paul L. Lamb and Richard B. Smith and AGAINST the proposal to
ratify the executive officers’ compensation, in line with our
announced intentions.
- Concerning the
proposal for the election of directors, Glass Lewis reported that
both incumbent nominees carried “ongoing compensation concerns” and
displayed “insufficient response to shareholder dissent.” As both
directors are members of the compensation committee, Glass Lewis
suggested they “may not be effectively serving shareholders in this
regard.” As they noted in their 2021 report on Gyrodyne, a
substantial 37.3% of the votes were cast against last year’s
executive compensation proposal. In addition to our protests, the
Board has taken no action to reflect the large amount of
shareholder dissent around this issue, among others, displaying
entrenchment and indifference toward shareholders. ISS similarly
suggested that the compensation committee “demonstrated poor
responsiveness to shareholder concerns.” Additionally, both firms
noted that the Board currently lacks gender diversity and appears
to lack racial/ethnic diversity.
- Regarding the
advisory vote to ratify the executive compensation program, both
firms identified poor governance practices. ISS reemphasized the
board’s indifference toward shareholder concern on the historical
say-on-pay votes, citing persistent low support of only 59.2% votes
cast in 2020 and 60.3% votes cast in 2021. Glass Lewis noted a
change of control provision within this proposal which would allow
for the acceleration of certain vested outstanding equity rewards
upon change of control, discouraging potential buyers and/or
lowering the potential premium paid to investors in this scenario.
They noted a lack of share ownership requirements among executives
(who collectively own 0%) as well as minimal ownership among
directors, failing to align the Board with the long-term interests
of shareholders. Furthermore, they felt that the retention bonus
plan allowing for non-executive director participation conflates
the perspectives of independent directors and executives.
Star Equity Fund believes significant
change to the Board is needed to unlock shareholder
value.
In light of these reports and our recent press
releases surrounding Gyrodyne’s poor corporate governance, we
believe significant change to the Board is necessary to unlock
shareholder value and to better align the Board’s interests with
shareholders. We maintain our intention to vote WITHHOLD on the
election of the two incumbents and AGAINST the executive
compensation plan and continue to push for the interests of
all shareholders of Gyrodyne.
About Star Equity Fund, LP
Star Equity Fund, LP is an investment fund
managed by Star Equity Holdings, Inc. Star Equity Fund seeks to
unlock shareholder value and improve corporate governance at its
portfolio companies.
About Star Equity Holdings,
Inc.
Star Equity Holdings, Inc. is a diversified
holding company with three divisions: Healthcare, Construction, and
Investments.
For more information contact:
Star
Equity Fund, LP |
The
Equity Group |
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|
Jeffrey E. Eberwein |
Lena Cati |
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|
Portfolio Manager |
Vice President |
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203-489-9501 |
212-836-9611 |
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jeff.eberwein@starequity.com |
lcati@equityny.com |
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