Circuit City Responds To Wattles, Stands Its Ground
By Colleen Bohen -- TWICE, 4/4/2008 7:53:00 AM
Richmond, Va. — Circuit City’s lead director Mikael Salovaara has offered shareholder Mark Wattles of Wattles Capital Management a chance to meet with its board to discuss his views of the company. The offer follows a letter Wattles sent to the board on April 2.
“It appears to me from your letter and certain other statements that you may not have a full understanding of the company’s current strategy and challenges, and I think a conversation will help provide a better picture of those efforts and possibly facilitate a more productive dialogue between the company and your firm,” Salovaara said.
Wattles’ letter made a series of demands for changes in the company’s structure and business strategy and notably called for the replacement of chairman and CEO Phil Schoonover. It included a number of indications that he felt Schoonover and his management team had made poor decisions and were at least in part responsible for the financial trouble the company has experienced in recent years.
In addition to offering a meeting, Salovaara also addressed Wattle’s ongoing campaign to nominate five candidates for election to Circuit City’s board. As previously reported, Wattles is seeking to unseat all 12 of Circuit City’s sitting directors and replace them with the five candidates he has proposed.
The company apparently followed Wattles’ nomination proposal by requesting meetings between each of his nominees and the company’s Nominating & Governance Committee.
Wattles’ April 2 letter said his company’s director nominees would meet with the committee if the board is “willing to commit in writing, without conditions, to the nomination of our director nominees as the company’s director candidates for election at the 2008 annual meeting, subject only to their interviews confirming their qualifications.”
He added, “Please note that our director nominees have no interest in participating in an evaluation process or interview as a mere formality so that you can disclose in the company’s proxy materials that you evaluated and considered us as the company’s director nominees, but nevertheless resolved to recommend the previously identified director candidates for election.”
Salovarra responded by calling Wattle’s proposed meeting conditions “unusual and unreasonable.” He said the company’s practice is to evaluate director nominees proposed by shareholders in the same manner it evaluates other prospective nominees.
Citing an obligation on the part of the board to its shareholders to “thoroughly interview potential members” as reason for not giving in to Wattles’ demands, Salovaara wrote, “This is even more true given that your proposal to remove the entire Circuit City board would, if adopted, give your nominees absolute control over the entire board.”
