Darden Restaurants formally announced this week that it has elected all twelve of activist hedge fund Starboard Value's nominees to its board of directors. The board also appointed Jeffrey Smith as independent non-executive chairman.
The newly-elected board members, whose full bios may be found here, are:
Starboard CEO Jeffrey Smith, who will serve on Darden’s CEO search committee;
Cynthia Jamison, who will serve on the audit committee;
James Fogarty, who will serve on the compensation committee;
William Lenehan, who will serve on the finance and real estate committee;
Betsy Atkins, who will serve on the finance nominating and governance committee;
Margaret Shan Atkins (no relation to Betsy Atkins);
Charles Sonsteby; and
The board also appointed Gene Lee, previously president and chief operating officer, as interim chief executive officer. Lee succeeds Clarence Otis, who has stepped down from the role, effective immediately. Darden said it would run a full search and consider both external and internal candidates for CEO.
The ousting of Darden’s entire board caps a one-year heated battle between Darden and a group of disgruntled activist investors, who issued a scathing 294-page, soup-to-nuts report on how the food chain can—and should—improve its operations.
Some of the criticisms in the report, “Transforming Darden Restaurants,” include:
General and administrative costs are excessive compared to peers, causing major inefficiencies and poor execution;
Executive perks are outside industry norms, and Darden has excess layers of management;
Advertising budget is oversized and ineffective;
Poor execution has lead to excessive food waste and high food cost without improving the overall customer experience;
Menus are too complex and technology solutions are inefficient;
Darden’s alcoholic beverage sales are one of the lowest in the industry, making up only 8 percent of sales in comparison to 16.5 percent of its industry peers.
Starboard claims its recommendations could boost earnings by as much as $326 million.