ISS recommendation stymies Solomon Lew’s push for influence on Myer’s board

Institutional Shareholder Services can’t find a compelling reason why its clients should back Solomon Lew’s choice for Myer’s board.

Proxy adviser Institutional Shareholder Services has recommended to its clients that they vote against the election of Terry McCartney to the board of Myer, possibly denting billionaire Solomon Lew’s efforts to get his candidate on to the board at next month’s annual general meeting.

It is the first proxy adviser to release its recommendation and could impact Mr Lew’s ability to rally other shareholders to his campaign against Myer’s board which is now in its sixth year.

Billionaire retailer Mr Lew is trying to use his Premier Investments’ 23 per cent stake in Myer to get Mr McCartney elected as a director, which would give his interests its first seat at the board table after years of throwing handgrenades at Myer directors from the AGM floor.

The Myer board has not made its own recommendation to shareholders on the election of Mr McCartney, who is the former boss of Myer Grace Bros, leaving that choice open to investors. But it in its notice of meeting sent to Myer shareholders this month it has raised the potential of alleged conflict of interest and questioned whether Mr McCartney would keep to certain Myer policies on independence.

Mr McCartney is a department store veteran and a longstanding director of Premier Investments which is controlled by Mr Lew and which in turn is Myer’s largest shareholder.

An ISS report, just released, argued for a vote against the election of Mr McCartney, saying it would be warranted because Premier Investments had failed to provide a compelling case as to how the proposed director would drive the company’s strategic direction.

ISS also said there was no compelling reason why the nominee would satisfy any skill deficiency the board might presently have.

Premier Investments’ Solomon Lew. Picture: Nicki Connolly

“Should Mr McCartney be elected as a director, he will join the board as a non-independent director nominee of Premier. Accordingly, the board will comprise four independent non-executive directors and two non-independent non-executive directors, bringing the level of board independence to only 67 per cent. The board, however, will remain majority independent,” the ISS report said.

“A vote against this resolution is warranted because Premier has failed to provide compelling rationale and has not presented sufficiently compelling arguments as to how the appointment of their nominee to the board would contribute to long-term shareholder value, and whether this would satisfy any skill deficiencies which the board does not presently have.

“Furthermore, non-associated shareholders may have concerns regarding matters raised by the board that Premier failed to acknowledge two of its fundamental policies that the board should comprise majority of independent directors with an independent chair at all times, and that Premier should not acquire or obtain control of the company unless through a takeover offer to all shareholders.”

As a retailer, Myer has been reinvigorated but that hasn’t stopped criticism from Solomon Lew. Picture: Dan Peled

Myer directors have longed fretted over what they saw as conflicts of interest between Mr Lew’s investments and businesses and Myer, with at one stage Mr Lew’s private and public companies one of the department store’s largest suppliers outside of the cosmetics category.

Mr Lew is now on a collision course with Myer after rejecting a direct request this month from the retailer’s chairwoman, JoAnne Stephenson, to stop increasing his shareholding unless he makes a takeover bid for the entire company.

Mr Lew, already the company’s largest investor, has also refused to commit to a majority independent Myer board as requested by the department store’s chair.

A spokeswoman for Premier Investments said the company was disappointed by the “bizarre conclusion” reached by ISS after it declined an opportunity to meet with Mr McCartney earlier this month.

Myer chairwoman JoAnne Stephenson.

“Notwithstanding the lack of engagement, on the facts alone it is hard to see how ISS reached its recommendation when Terry’s skills and retail experience are clearly additive to the current board composition. The Myer board does not question Terry’s credentials,” the spokeswoman said.

“As a Premier director he is part of a team that has grown profit by over 160 per cent since his appointment in 2016. Also, as a former managing director of Myer Grace Bros he delivered the company’s record profit and has specific department store insights and experience – something no other Myer non-executive director has.

“Smart shareholders will exercise their own discretion in voting their shares.”

The Myer AGM will be held on November 10.

Originally published as ISS recommendation stymies Solomon Lew’s push for influence on Myer’s board