A sizable chunk of Rite Aid’s shareholders has told the board it would like to hire a new audit firm.
The company disclosed in a recent Form 8-K filing that 15.3 percent of its shareholders voted against ratifying Deloitte, which has audited Rite Aid’s financial statements since 1999. That’s up from 5.5 percent of shareholder votes against ratifying the firm in 2017. In the same filing, the company disclosed a majority of shareholders voted against the compensation package proposed for the company’s named executive officers.
Shareholder votes are advisory to the board, which makes the final decision on which firm will audit the company’s financial statements and, where required, internal control over financial reporting. Neither Rite Aid nor Deloitte commented on the vote.
Votes in any significant number against auditor ratification are not common, according to an analysis by Audit Analytics, which says the board’s audit firm pick is supported by an average shareholder vote of 98.7 percent. Of the remaining 1.3 percent, 0.4 percent represents the share of voters who abstain.
In 2017, Audit Analytics says, a total of 15 companies faced more than 20 percent of shareholders voting against the board’s selection of audit firm. Planet Fitness led that group with 37.4 percent of votes opposing the auditor.
At Rite Aid, some shareholders are pushing back against “years of underwhelming performance and two failed merger attempts,” looking for new leadership. The company’s CEO stepped down in 2017, and shareholders are already looking for a replacement for the current CEO, John Standley.
Rite Aid called off merger talks with grocery retailer Albertson in mid-2018, driven largely by shareholder disapproval and the objections of third-party advisory firms, including Glass Lewis and Institutional Shareholder Services. The company also failed to complete an earlier deal with Walgreens.
The company marked down its goodwill in 2018 with an impairment of $261.7 billion associated with its pharmacy services segment. Rite Aid has written down the value of its plate, property, and equipment at least five times since 2014 by a combined $152 billion. The company also reported a significant hike in audit fees in 2016, which jumped nearly 40 percent.