Gary Weiss rejected for Cromwell board by ISS for ‘too many’ directorships

The battle for the Brisbane-based property funds manager is heading to a crescendo at a crucial vote later this month.

Gary Weiss. Picture: Adam Head

A bid by corporate raider Dr Gary Weiss to be appointed to the board of Cromwell Property Group has been rejected by institutional proxy adviser ISS, setting the scene for a tight vote at a meeting later this month.

But it is supporting a move by Melbourne businessman and ABC board member Joe Gersh, who is effectively on the same ticket, to be appointed to Cromwell’s board.

Their move is being backed by dissident shareholder ARA Asset Management which controls about 26 per cent of the register and has also launched a partial takeover bid.

But it has provoked fierce resistance from the Paul Weightman-led company, which sees ARA as a competitor, and last week proxy house CGI Glass Lewis lashed the push to elect them to the board.

ISS said notwithstanding his highly regarded qualifications, which many boards would otherwise benefit from, a vote against the election of Dr Weiss was warranted “solely on the basis of over boarding concerns”.

But it said a vote for the election of Mr Gersh was warranted. “If elected, ARA would have one board representation on a seven-member board which is not disproportional to its shareholding,” ISS said.

Cromwell raised a concern that Mr Gersh did not have experience on a listed board but one of his principle areas of expertise is major property development, particularly the construction of hotels, shopping centres, and subdivisions, apartments and office towers, which it said was likely to benefit the company

Dr Weiss has twice failed in attempts to be elected to Cromwell’s board but investment house JPMorgan said last week that his bid would likely narrowly succeed.

ARA and Cromwell have been at loggerheads and the tensions saw ARA’s local chief David Blight resign from Cromwell’s board in mid-2019, shortly after it was cut out of an institutional placement.

Dr Weiss has pledged to step down as a director of the ARA-linked Straits Trading Company in Singapore if appointed and has retired from Ridley’s board. But he faces significant challenges as chairman of Ardent Leisure, owner of Dreamworld, and chairing aged care company Estia.

ISS said while some investors may be comforted by his commitment about Straits and some perceived conflicts of interests may be regarded as removed, and he was not involved in any day-to-day management or operations of ARA, they may still have concerns for his “over boarding” given the number of directorships he would keep.

The move by Dr Weiss and businessman Mr Gersh to be elected to Cromwell’s board took a knock last week with CGI recommending against them. “We consider ARA’s current effort feels like a somewhat stagnant retread in several key respects,” CGI said.

The proxy adviser argued the appointment of Mr Gersh and Dr Weiss — both of whom would represent the interests of ARA — would be “significantly hampered” by the fact that ARA, in the midst of a potentially transformative proportional bid, had offered ”substantially no alternative strategies” for the company.

Last week rival proxy Adviser Ownership Matters told its clients to back Dr Weiss and Mr Gersh to be elected to the Cromwell board.

The $2.7bn company last month reported an operating profit lift of 27 per cent to $221.2m, even as the coronavirus pandemic crisis struck its investments, including a controversial $1bn Polish shopping centre portfolio.

“OM opines it is reasonable for ARA, as a 26.7 per cent Cromwell security holder, to hold a level of board representation approximate to its equity ownership. If ARA’s board nominees are both appointed, they will have two directors on a board of eight directors, equivalent to 25 per cent of the board,” the proxy adviser said.