PROXY Governance, Inc. Recommends CPI Corp. Stockholders Withhold Votes From the Chairmen of Two Key Committees Who Have Exercis
July 01 2009 - 8:15AM
PR Newswire (US)
Expresses Significant Concerns With CPI Board's Unwillingness Or
Inability To Address Corporate Governance Issues And Conflicts Of
Interest NEW YORK, July 1 /PRNewswire/ -- RCG Starboard Advisors,
LLC, a subsidiary of Ramius LLC (collectively, "Ramius"), today
announced that PROXY Governance, Inc. ("PGI"), an independent proxy
voting advisory firm, has issued a proxy analysis in which it
recommends that stockholders withhold their votes for Turner White
and James Abel, the Chairmen of the Compensation and the Nominating
and Governance Committees, respectively, who were nominated by
management. The PGI report expresses significant concerns with the
unwillingness or inability of the Board of Directors of CPI Corp.
("CPI" or the "Company") (NYSE:CPY) to address corporate governance
issues and conflicts of interest at the Company. Earlier today,
RiskMetrics Group ("RiskMetrics" or "RMG"), the leading independent
proxy voting advisory firm, issued a report recommending that CPI
stockholders vote on Ramius's GOLD proxy card to elect Ramius
nominees Peter A. Feld and Joseph C. Izganics to the Board of
Directors of CPI to replace current CPI directors Michael Koeneke
and Turner White. Excerpts of PGI's Proxy Analysis On the Board's
Flawed Judgment in Determining that Chairman David Meyer is
"Independent" and the Significant Conflicts of Interest It Has
Caused: - "We do agree with the chair of the Compensation Committee
that it is 'beneficial to the company that independence occurs,'
but we question whether simply wishing it makes it so. We also
agree that determining a director's independence is sometimes a
business judgment issue. In this case, however, that judgment seems
seriously flawed. In declaring Meyer independent the board papered
over the serious conflict of letting his business partner, Koeneke,
continue to sit on the Compensation Committee even as it negotiated
Meyer's contract. It also created the Kafka-esque reality in which
Meyer has a role in approving both sides of the negotiation, making
it substantially more difficult (and awkward) for a truly
independent director to question the wisdom or the terms of the
agreement. A good independent director would overcome those
challenges. A healthy dose of business judgment would never have
allowed them to fester." (emphasis added) "Because it classified
him as an independent director, however, the board has created
significant, unnecessary, and enduring potential for conflicts of
interest, some of which have already become real." (emphasis added)
On Who Should Bear "Special Responsibility" for Decision to
Classify Chairman Meyer as "Independent": - "As chairs of the
Compensation Committee, which ignored these significant governance
issues in negotiating the contract, and the Governance Committee,
which holds a specific charter to identify and remedy such issues,
we believe directors White and Abel bear special responsibility for
this poor judgment..." On Chairman David Meyer's Troublesome
Compensation Arrangements: - "Other directors who served for the
entire year received 2008 compensation ranging from $83,992
(Koeneke) to $97,405 (Abel). If as a true non-executive chairman
Meyer has no role in or responsibility for the company's
operations, shareholders should rightly wonder why he receives an
annual retainer of more than twice those amounts - let alone an
"annual performance bonus" of up to 0.67% of adjusted EBITDA." -
"In September 2008, however, the company also entered into a
Chairman's Agreement which provides for base and incentive
compensation to non-executive chairman Meyer at levels roughly on
par with the company's senior executives in a bad year and
potentially significantly higher in a good year. Under terms of the
agreement Meyer will receive an annual retainer of $200,000 in
restricted stock (paid quarterly and vesting at the end of the
quarter in which the grant was made) and an "annual performance
bonus" equal to 0.67% of adjusted EBITDA, also in restricted stock,
which vests immediately .... PROXY Governance believes that
performance-based compensation is rarely appropriate for
independent directors, as it may create conflicts of interest
through which they become less likely to question risky decisions.
Stock ownership among directors may help align their interests with
those of other shareholders. Even if it is in the form of
restricted shares, however, director compensation which depends on
achievement of financial and operating targets risks turning
independent directors from watchdogs into cheerleaders." Ramius
Partner Mark R. Mitchell stated, "We are gratified that a second
independent proxy advisory firm has expressed its significant
concerns with the governance practices at CPI and the serious
conflicts of interest on the CPI Board. Over the course of this
election contest, CPI has repeatedly stated to stockholders that it
is 'at the forefront of corporate governance.' We urge all
stockholders to ask themselves whom they should trust, a Board who
will say and do anything to get its nominees elected or two
independent proxy voting advisory firms who have each separately
expressed serious concerns with the Company's governance practices
and with significant conflicts of interest. We hope and expect
stockholders can see why it is critical for there to be truly
independent directors on the CPI Board, including a representative
of stockholders whose interests are directly aligned with those of
all stockholders. We believe stockholders will suffer if
Knightspoint Partners' influence over the Board continues
unchecked." Concluded Mitchell, "We urge our fellow stockholders to
vote our GOLD proxy card today to elect Ramius's director nominees
who are firmly committed to the future success of CPI Corp."
Important Voting Information Ramius urges CPI stockholders to
follow the recommendation of RiskMetrics and vote the GOLD proxy
card to elect Ramius's two (2) nominees, Peter A. Feld and Joseph
C. Izganics. Stockholders voting on our GOLD proxy card will also
be able to vote for the candidates who have been nominated by the
Company other than Turner White and Michael Koeneke, giving
stockholders who wish to vote for Ramius's nominees the ability to
also vote for the total number of directors up for election at the
Annual Meeting. In certain of our proxy solicitation materials we
have presented a list of certain Company director nominees below a
heading entitled "Ramius Gold Proxy" in order to illustrate for you
who would be elected to the CPI Board in the event you vote on our
GOLD proxy card in accordance with our recommendations. Please note
that the Company director nominees that we included in this list
have not consented to being named in our proxy statement or related
solicitation materials and do not support our slate of director
nominees. Also, there can be no assurance that any of CPI's
nominees will serve as directors if our nominees are elected. About
Ramius LLC Ramius LLC is a registered investment advisor that
manages assets in a variety of alternative investment strategies.
Ramius LLC is headquartered in New York with offices located in
London, Tokyo, Hong Kong, Munich, and Luxembourg. Media Contact:
Peter Feld Ramius LLC (212) 201-4878 CERTAIN INFORMATION CONCERNING
PARTICIPANTS Ramius Value and Opportunity Master Fund Ltd ("Value
and Opportunity Master Fund"), together with the other participants
named herein, has made a definitive filing with the Securities and
Exchange Commission ("SEC") of a proxy statement and accompanying
GOLD proxy card to be used to solicit votes for the election of a
slate of director nominees at the 2009 annual meeting of
stockholders of CPI Corp., a Delaware corporation (the "Company").
VALUE AND OPPORTUNITY MASTER FUND ADVISES ALL STOCKHOLDERS OF THE
COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS AS
THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON
THE SEC'S WEB SITE AT http://www.sec.gov/. IN ADDITION, THE
PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF THE
PROXY STATEMENT WITHOUT CHARGE UPON REQUEST. REQUESTS FOR COPIES
SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY SOLICITOR. The
participants in this proxy solicitation are Value and Opportunity
Master Fund, Ramius Enterprise Master Fund Ltd ("Enterprise Master
Fund"), Starboard Value & Opportunity Fund, LLC ("Starboard
Value & Opportunity Fund"), Ramius Merger Arbitrage Master Fund
Ltd ("Merger Arbitrage Master Fund"), Ramius Multi-Strategy Master
Fund Ltd ("Multi-Strategy Master Fund"), Ramius Leveraged
Multi-Strategy Master Fund Ltd ("Leveraged Multi-Strategy Master
Fund"), Ramius Advisors, LLC ("Ramius Advisors"), RCG Starboard
Advisors, LLC ("RCG Starboard Advisors"), Ramius LLC ("Ramius"),
C4S & Co., L.L.C. ("C4S"), Peter A. Cohen ("Mr. Cohen"), Morgan
B. Stark ("Mr. Stark"), Thomas W. Strauss ("Mr. Strauss"), Jeffrey
M. Solomon ("Mr. Solomon"), Peter A. Feld ("Mr. Feld") and Joseph
C. Izganics ("Mr. Izganics"). As of the date hereof, Value and
Opportunity Master Fund beneficially owned 797,988 shares of Common
Stock, Starboard Value and Opportunity Fund beneficially owned
212,040 shares of Common Stock, Merger Arbitrage Master Fund
beneficially owned 192,000 shares of Common Stock, Leveraged
Multi-Strategy Master Fund beneficially owned 29,213 shares of
Common Stock, Multi-Strategy Master Fund beneficially owned 179,614
shares of Common Stock and Enterprise Master Fund beneficially
owned 202,054 shares of Common Stock. As of the date hereof, RCG
Starboard Advisors (as the investment manager of Value and
Opportunity Master Fund and the managing member of Starboard Value
and Opportunity Fund) is deemed to be the beneficial owner of the
(i) 797,988 shares of Common Stock owned by Value and Opportunity
Master Fund and (ii) 212,040 shares of Common Stock owned by
Starboard Value and Opportunity Fund. As of the date hereof, Ramius
Advisors (as the investment advisor of Multi-Strategy Master Fund,
Merger Arbitrage Master Fund, Leveraged Multi-Strategy Master Fund
and Enterprise Master Fund) is deemed to be the beneficial owner of
the (i) 179,614 shares of Common Stock owned by Multi-Strategy
Master Fund, (ii) 192,000 shares of Common Stock owned by Merger
Arbitrage Master Fund, (iii) 29,213 shares of Common Stock owned by
Leveraged Multi-Strategy Master Fund, and (iv) 202,054 shares of
Common Stock owned by Enterprise Master Fund. As of the date
hereof, Ramius (as the sole member of each of RCG Starboard
Advisors and Ramius Advisors), C4S (as the managing member of
Ramius) and Messrs. Cohen, Stark, Strauss and Solomon (as the
managing members of C4S) are deemed to be the beneficial owners of
the (i) 797,988 shares of Common Stock owned by Value and
Opportunity Master Fund, (ii) 212,040 shares of Common Stock owned
by Starboard Value and Opportunity Fund, (iii) 179,614 shares of
Common Stock owned by Multi-Strategy Master Fund, (iv) 192,000
shares of Common Stock owned by Merger Arbitrage Master Fund, (v)
29,213 shares of Common Stock owned by Leveraged Multi-Strategy
Master Fund, and (vi) 202,054 shares of Common Stock owned by
Enterprise Master Fund. Messrs. Cohen, Stark, Strauss and Solomon
share voting and dispositive power with respect to the shares of
Common Stock owned by Value and Opportunity Master Fund, Starboard
Value and Opportunity Fund, Multi-Strategy Master Fund, Merger
Arbitrage Master Fund, Leveraged Multi-Strategy Master Fund and
Enterprise Master Fund by virtue of their shared authority to vote
and dispose of such shares of Common Stock. As of the date hereof,
Mr. Feld holds 5,252 shares of restricted stock awarded under the
Company's Omnibus Incentive Plan that vest in full on February 6,
2010. As of the date hereof, Mr. Izganics directly owns 500 shares
of Common Stock. As members of a "group" for the purposes of Rule
13d-5(b)(1) of the Securities Exchange Act of 1934, as amended,
each of the participants in this proxy solicitation is deemed to
beneficially own the shares of Common Stock of the Company
beneficially owned in the aggregate by the other participants. Each
of the participants in this proxy solicitation disclaims beneficial
ownership of such shares of Common Stock except to the extent of
his or its pecuniary interest therein. DATASOURCE: Ramius LLC
CONTACT: Peter Feld of Ramius LLC, +1-212-201-4878
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