Chico’s FAS on Wednesday made changes to its corporate governance structure, including a proposal to elect board members annually, as it faces a proxy fight from one of its shareholders.
Declassification of a board, as the move is known, is viewed as a shareholder-friendly measure that ensures the entire board is held accountable by investors on an annual basis, rather than staggering directors’ terms. Shareholders will vote on the proposal at Chico’s (CHS) July 21 annual meeting.
The Fort Myers, Florida-based women’s retailer also said it had appointed Susan Lanigan, a former senior executive at Dollar General (DG), as its general counsel.
Lanigan was among the executives who participated in recent discussions centered on the company’s corporate governance, which resulted in the board declassification recommendation, Chico’s said.
The moves follow the start of a proxy fight by activist hedge fund Barington Capital, which has proposed two director nominees to stand for election at the annual meeting. Chico’s responded by nominating two directors of its own, who will replace current board members.
While subjecting directors to an annual vote makes a company more vulnerable to activist hedge funds seeking a seat, longer-term institutional investors, which hold heavy voting power at annual meetings, view the move favorably.
Chico’s plans to declassify its board over three years, resulting in all directors standing for election at its 2019 annual meeting.
The company also said its directors could not be on more than four other public companies’ boards, another corporate governance move that large institutional shareholders support.
Barington has nominated two candidates, including its chief executive officer, James Mitarotonda. He holds a seat on the board of manufacturer A. Schulman and was a Jones Group director before the retailer was acquired in 2014.
New York-based Barington did not immediately respond to a request for comment on Chico’s announcement.
Chico’s said on Tuesday that it would nominate Hudson’s Bay Vice Chairman Bonnie Brooks and former Walmart U.S. CEO Bill Simon to run for election to its nine-member board. Two current directors will step down this year.
The company, worth about $1.5 billion, in December hired a new CEO, who is in the process of a turnaround plan. Its shares have fallen nearly 40 percent over the past year.