Bed Bath & Beyond revamps board; shareholders revolt

Among the changes announced by the company, the board will be comprised of 10 directors—nine independent, six of whom will be women. “The transformed board will reflect significant diversity across race, gender, and ethnicity and have an average tenure of less than four years,” the company said.

Moreover, cofounders Warren Eisenberg and Leonard Feinstein have transitioned to the role of cofounders, cochairmen Emeriti and will retire from the board. The current lead independent director, Patrick Gaston, has been named independent chairman, effective immediately.

“As we have communicated to Bed Bath & Beyond shareholders, the board has been undertaking a comprehensive review of its composition, governance structure, and compensation practices,” Gaston said. “The changes … reflect significant shareholder input and underscore our commitment to ensuring we have best-in-class governance.”

“This board transformation and refreshed governance structure is rooted in accountability, transparency and collaboration, and as we provide oversight and move the company forward, we are committed to continuing to act in the best interest of our shareholders,” Gaston added.

Governance enhancements

Bed Bath & Beyond also announced a series of additional governance enhancements. Specifically, the board will form a business transformation and strategy review committee to review all aspects of the company’s business transformation, strategy, and structure.

To further enhance its independence, organization, and leadership responsibilities, the board also intends to reconstitute the audit and compensation committees with a mix of new and existing independent directors, including the appointment of committee chairs, the company said.

“The changes made to our board composition take into account the important feedback that we’ve received following discussion with many of our shareholders over the past year,” said Virginia Ruesterholz, independent director and recently appointed chair of the nominating and corporate governance committee. “Our board is committed to continuing to engage with our shareholders, is open to further input, and will continue to assess board refreshment on an ongoing basis.”

A new executive compensation plan that increases the at-risk component of executive compensation and further aligns compensation with company performance and long-term shareholder value creation will be adopted. The company will provide details on its new executive compensation plan in connection with the filing of its proxy statement.

Bed Bath & Beyond said it has had “multiple discussions” with members of the activist group—composed of Legion Partners, Macellum Capital Management, and Ancora Advisors—and “has invited them to participate in the board transformation process and to offer their ideas for business and operational improvement.”

“To date, the Activist Group has declined this invitation,” Bed Bath & Beyond said, “but the company remains open to engaging in constructive dialogue with them.

New independent directors

Also, as part of the changes, five current independent directors will step down, and five new independent directors have been appointed. Effective May 1, the five newly appointed independent directors are:

• Harriet Edelman, current vice chair at Emigrant Bank;
• Harsha Ramalingam, president and owner of a consulting firm;
• Andrea Weiss, founding partner of The O Alliance Consulting Services and chief executive officer and founder of Retail Consulting Inc.;
• Mary Winston, president and founder of financial and board governance consulting firm WinsCo Enterprises Consulting Services; and
• Ann Yerger, former executive director of the Council of Institutional Investors.

As leaders in the fields of global retail, merchandising, technology, logistics, finance, and governance, “collectively, their perspectives, experience, and expertise will greatly enhance the effectiveness of our board,” Ruesterholz said.

Shareholder revolt

Bed Bath & Beyond’s shareholders still aren’t happy and issued a joint statement citing their many concerns, “including that CEO Steven Temares must be held accountable for the company’s prolonged poor performance and destruction of shareholder value,” the investors said in a joint statement.

“Further, the company’s announcement lacks any detailed strategic vision for driving value creation at Bed Bath. We will, therefore, continue to move forward with our campaign to install fresh, experienced, and independent oversight and management at the company.”

The investors said that, while they are still reviewing the new directors, “our initial assessment is that the new additions to the board do not have the required skill sets and retail experience to effect swift and real change. This board needs independent directors with deep retail experience at the highest levels.

“The company’s track record in identifying additions to the board in the past does not instill confidence about their ability to put in place qualified management—and the reaction of the company’s share price so far indicates that other investors feel similarly. Further, we do not believe that the addition of five new directors who were hand-picked by the current incumbent directors will translate to the level of independent oversight that the company requires.

“More meaningful change is urgently needed—which is why Legion Partners Holdings has nominated highly qualified, independent candidates to the board at the 2019 Annual Meeting of Shareholders. Our diverse slate of experienced retail experts will be focused on hiring a new CEO, repositioning the company for profitable growth, and instituting best-in-class corporate governance. These candidates have worked hard to develop a strategic plan for Bed Bath going forward, which will be released in the coming days. We remain committed to taking on the hard work necessary to make improvements at Bed Bath for the benefit of all stakeholders.”