The battle over four of the seats on Genesco’s board of directors fired up again this week. Legion Partners Asset Management, the activist investor looking to place its own nominees on Genesco’s board, released another presentation detailing its case for a set of new directors and what it says is the footwear company’s ongoing underperformance and poor shareholder return.
In response, Genesco unveiled a previously unreleased letter that it wrote to Legion on May 19 where the footwear company urged Legion to end its campaign and engage collaboratively with Genesco. Legion’s attacks, Genesco said, “threaten damage to our brands and businesses” but the footwear company said that together the two companies “can jointly strengthen the Genesco board.”
Genesco disclosed that it had tried to work collaboratively with Legion at the timing of the May letter for seven weeks toward “a constructive resolution.” Genesco wrote that Legion did not engage “in a meaningful dialog with us about board composition or refreshment prior to abruptly launching a public campaign,” and noted that Legion refused to share its board candidates with Genesco before sharing them with the media and the public.
Genesco representatives on Tuesday reiterated in a phone interview that its board “has consistently tried to engage with Legion in an attempt to work collaboratively and consider their concerns, notwithstanding Legion refusing to participate in a meaningful dialogue with Genesco.”
For its part, Legion’s Chris Kiper and Ted White, who are managing directors, said in a Tuesday statement that Genesco “has once again validated our case for urgent change by disseminating blatant distortions and misrepresentations to its shareholders. Rather than try to comprehensively respond to the substantive presentations we issued last week and yesterday, Genesco released a six-week-old private letter that mischaracterizes settlement discussions in an attempt to imply a lack of engagement on our part.”
The statement from Legion added that the hedge fund has tried to engage in good faith and that “if a settlement framework were established,” it would be willing to make its board nominees available for interviews by Genesco.
Genesco’s May letter revealed that Legion had “repeatedly blocked” it or its search firm from interviewing Legion’s board nominees. Legion, which owns 5.9% of Genesco’s shares, has nominated Marjorie L. Bowen, Margenett Moore-Roberts, Dawn H. Robertson and Hobart P. Sichel to the Genesco board.
Genesco said that Legion’s “specious attacks” have caused “unnecessary disruption, damage and expense.” The company went on to note that in 2018 it was open to new directors Legion selected at that time and said it remains willing to find ways to resolve this proxy campaign.
“You have, unfortunately, repeatedly rebuffed our efforts to engage constructively and have continued to insist that we replace a majority of the board with you controlling those changes, which we have explained is not a justified or reasonable request,” Genesco wrote.
For example, the footwear company said it would ideally like to work together with Legion to improve Genesco including by appointing a new senior leadership team; overseeing strategy and performance; retiring tenured directors; and reviewing the company’s brand portfolio, among other initiatives.
Genesco also asserted in the May 19 letter that “Legion had submitted false and misleading nomination material with respect to criminal charges brought against a Legion nominee for second degree assault against a minor last year” and expressed concern over Legion’s assertion “that the candidate nevertheless still had the qualifications to serve on Genesco’s Board and oversee youth-oriented brands.”
In an email today, a Legion representative responded: “We submitted a valid nomination, which did not include false or misleading information. Genesco is trying to divert attention away from the need for meaningful boardroom change by recycling distortions. The four nominees we’re seeking to elect at the annual meeting have the highest levels of integrity and unimpeachable records. This is why they’re leaders in their respective fields today.”
The proxy battle started in April when Legion informed Genesco of its intention to nominate a controlling slate of seven individuals for election to the board of directors. In mid June, after Genesco had sent the May letter, Genesco said that Legion “has made no effort to engage constructively with Genesco regarding Legion’s proposed nominees and has failed to bring forward any value-creating ideas.” The shareholder meeting to vote on the board nominees will take place July 20.
After rising in early trading, Genesco shares were relatively flat on Tuesday at $62.48.
In its new presentation Monday, Legion outlined 10 “misleading claims” that it says Genesco has made about its footwear business, contends that the company does not know how to build footwear brands, and describes the last 10 years as “a lost decade” at Genesco driven by specific failures it lists by the four directors it wants replaced. Comparatively, the firm said its own board nominees “exhibit excellence and open minds” that will create value at Genesco.
One of the “misleading claims” that Legion asserts is untrue centers on whether it has engaged constructively with Genesco to reach a settlement.
“For nearly three weeks, Legion engaged in discussions with Genesco to try to avoid a proxy contest,” the presentation says. “Genesco informed us that they planned to add three new directors to the board and would consider adding one of our candidates. Assuming the three new directors were qualified and independent, Legion was prepared to accept this settlement to add a single Legion nominee to the board if 20-year tenured board member Matthew C. Diamond would leave Genesco’s board by the 2022 annual meeting of shareholders.”
Genesco, Legion said, ceased further settlement talks after refusing to end Diamond’s tenure on the board next year.
“Throughout his 20 years on the board, Mr. Diamond has presided over excessive executive compensation, sustained underperformance and questionable corporate governance practices – there is no compelling case for keeping him as a director,” Legion wrote in the presentation.
Legion implied in the statement released Tuesday that it would resume settlement discussions if Diamond and three other board members — Thurgood Marshall, Jr., Joanna Barsh and Kevin McDermott, who Legion said “continue to hold the company back” — are also removed.
Genesco had written in its May letter that “it would not be proper, well-functioning governance for [Legion] to unilaterally decide which members of Genesco’s board should retire.”
In April, Legion, along with three other investors, struck a deal with department store chain Kohl’s Corp. to add three directors to its board, two of which were independent directors nominated by the investor group.