Activist investor Starboard Value LP won all 12 seats of the restaurant company’s board of directors on Friday, winning shareholder support after arguing the Olive Garden chain was poorly run.
Investor Starboard Value LP had aimed to overthrow the entire 12-director Darden (DRI) board and replace it with a slate of its own, and came away victorious. Darden had advocated for its own slate of board director nominees, which included four candidates proposed by Starboard–at an annual shareholder meeting held on Friday.
“The new Board is prepared and excited to immediately begin working alongside Darden’s management team to put Darden on track for long-term value creation for all shareholders,” said Starboard Chief Executive Jeffrey Smith, in a statement on behalf of Darden’s newly elected board.
Smith will be joined by 11 others that Starboard had backed, including a former chief financial officer of Brinker International, a PepsiCo executive, a former American Italian Pasta Co. CEO and several others. They were elected at a meeting that was held in Orlando, Fla.
The new board will also have an opportunity to name a new CEO, as Darden’s top executive Clarence Otis in July announced his plans to step down by the end of the year.
Starboard, which is the second-largest investor in Darden with a 8.8% stake, last month issued a very-detailed nearly 300-page slide presentation that gave details of a potential turnaround plan for Darden’s Olive Garden chain, where it claimed customers had “fond memories, but where we believe execution has recently failed to live up to the brand image.” Some of the top complaints focused on the company’s all-you-can-eat breadsticks, which Darden said were too plentiful and lacked flavor, as well as low alcohol sales compared to rival casual-dining chains and salads that were overfilled and dressed with too much dressing.
The investor’s strategy resonated with two of the world’s largest proxy firms — Glass Lewis & Co. and Institutional Shareholder Services (ISS)–backed Starboard’s full slate of nominees ahead of the meeting. Another firm, Egan-Jones, supported Darden.
A few days after the Starboard presentation, Olive Garden fought back, saying its unlimited breadsticks and salad dressings were working out just fine with customers. Darden also argued that the company’s alcohol sales were increasing, while the average check sizes were higher at remodeled locations. U.S. same-store sales slid 1.3% at Olive Garden for the latest quarter, trailing all other formats owned by Darden. In September, the chain returned to modest growth, posting a 0.6% increase in same-store sales from a year ago.
