DRI: ARE WE BEING MUSHROOMED?
Some thought for Darden’s independent Directors.
Mushrooms can tolerate some light, but they thrive best in the dark while they grow in composted manure. If you are being “mushroomed,” you are likely being left in the dark and fed a steady diet of offal. I hope this is not an accurate metaphor for Darden’s independent Directors.
With that being said, I must ask a simple question: Are Darden’s independent Directors being “mushroomed” and left in the dark by management?
I ask this because, from where I sit, I see a disconnect between what management is telling shareholders and reality.
During my tenure as an analyst, I have been both complementary and critical of Darden. My first priority is, and has always been, to look out for the shareholders of any company I follow. While I am not always right, I have built an honest and respectable track record. Admittedly, my opinions can be very critical at times. This is, without a doubt, the most difficult part of my job.
For the past year, I have been rather critical of Darden’s performance and the overall direction of the company; I’m not alone in this. I have encountered numerous Darden shareholders who are bewildered and frustrated by the direction in which management has taken this company. I firmly believe that Darden is now at a critical juncture in its existence, and I am concerned that management may be withholding the critical concerns of Darden’s less vocal shareholders from the Board. Management wants shareholders to believe they have overwhelming support in their “value creation plan.” From what I have seen, this is far from the truth.
As an analyst covering Darden, I frequently hear from institutional shareholders who have grown frustrated over the wall of silence that has been built around the company. It is this wall that has allowed the poor decision making of management to persist with impunity.
The recent cancellation of the company’s analyst day is an obvious case in point — and note that the open analyst day has just been replaced by a “sell-side” analyst day (to which I was not invited), which presumably will allow management to cozy up to more cooperative members of the analyst community. I believe holding an open dialogue with shareholders is a sound business practice. I also believe the Board has a fiduciary obligation to fully weigh shareholder concerns before signing off on decisions that will materially affect the company’s future.
MY MESSAGE TO THE BOARD IS THIS:
I encourage you to hold conversations with current shareholders to gain an unfiltered perspective and understanding of their current mindset. To be clear, I think it is more than reasonable to assume Staboard will be successful in gathering the appropriate votes needed to call a Special Meeting and prevent the Red Lobster spinoff. A number of institutional shareholders are very frustrated over their inability to communicate with the company. None of them has indicated to me which side they are inclined to take in this dispute, but if Starboard is successful, you will face a much different situation than you currently do.
It should also be noted that the SEC, under the leadership of its new chair, Mary Jo White, has placed renewed emphasis on issues of corporate governance, the proxy process, and shareholder participation in corporate decision-making. Given the chain of events that I believe will unfold in the coming months, it would behoove you to be proactive and meet with these shareholders.
