Advisory firms: Napster's dissident shareholders wrong for the board
Napster management got a big boost in its proxy fight today when Glass Lewis and Proxy Governance, two independent proxy advisory firms, said separately that shareholders should not elect three dissidents seeking seats on Napster's board. The company's annual meeting is scheduled for Sept. 18.
The opposition has not "proven that its nominees have the appropriate background or necessary expertise to serve as members of the Napster board," Glass Lewis said in its report.
While great news for Napster, it's not time for the Los Angeles-based digital music company to throw confetti in the air. Glass Lewis' report gave Napster management low marks for compensation and said it could do a better job linking Chief Executive Chris Gorog's pay to the company's performance (Napster earned a D grade, but hey, that was up from an F last year). Glass Lewis supported the dissidents' proposals related to governance and said it would normally recommend that shareholders withhold support for the head of the compensation committee, Robert Rodin. Except in this case, withholding support for Rodin might help get one of the dissident shareholders elected.
Napster has been struggling to find the right business model. It operates a retail music store, a subscription service and other services for accessing digital music.
Three shareholders, who together own about 1.5% of the company, said last month they would seek board seats in the hopes they could together pressure Napster to seek a buyer or find a better strategy. The company argued that the candidates were inexperienced when it comes to sitting on boards of public companies and had no experience in the digital music business.
The three dissidents have pointed to the company's stock price, which closed at $1.31 today, down 3 cents, or more than 2%. Glass Lewis pointed out that the trajectory of Napster's stock over the past two years was not that much different than other similar stocks.
In other words, this can be a hard business for everyone.
-- Michelle Quinn
Photo: Napster logo at an October 2003 event soon after it began trading on the New York Stock Exchange. Credit: Jeff Christensen / AFP/Getty Images