ISS Sides with Burkle in B&N Matter

Institutional Shareholder Services (ISS) a major proxy-advisory firm, has recommended that shareholders in Barnes & Noble vote for the dissident slate backed by Yucaipa Cos. in the ongoing proxy fight.

B&N holds its annual meeting a week from today. Each of the other three major proxy-advisory firms, Glass Lewis, PROXY Governance, and Egan-Jones, has come down on the management's side.

This is in accord with the developing pattern. The folks at ISS are more likely to back insurgents than their colleagues.

In this case, ISS says: "Barnes & Noble’s history of poor performance, analysts’ lack of confidence in management’s ability to achieve its targets, corporate governance concerns regarding the company’s employment relationships with Leonard and Stephen Riggio, concerns about the independence of the current board, and questions over the rationale for the 2009 acquisition of Barnes & Noble College Booksellers from Chairman Leonard Riggio."

The book selling business is in the midst of a major transformation, and B&N has tried to keep ahead of the curve, bring out its Nook to compete with Amazon's Kindle and the other eReaders on the market for example. B&N has been increasingly aggressive over the last year in using its bricks-and-mortar stores to push the eReader on shoppers. That sounds a bit odd: "Buy this, and you'll never have to come here again!" -- but such is the transition to a digital age. Or to whatever the heck we are all heading for.

But some are skeptical of whether they really are out in front. Goldman Sachs, in a late-August report, said: "Results fell short of our forecast and, more importantly, reduced visibility on objectives going forward, given two factors: (1) Additional disclosure revealed surprisingly low gross profit margins for the .com business, reflecting both sharp, structural margin cuts in the traditional (physical) .com realm, and poor underlying profitability of the digital business in aggregate (Nook + ebooks). (2) Soft superstore sales, as results missed guidance issued two thirds of the way through the July quarter."

Icahn's Slate Loses at BIIB

I reported in April that Carl Icahn was making waves at a company called Biogen Idec.

Now we can report that Icahn put forward a three-nominee slate in a contested election for four open board seats at the annual meeting held last week.

It isn't clear what the margin of defeat was. But it is now clear that all the Icahn-backed candidates were defeated.

The management candidates received an important assist from each of the major proxy advisory services. ISS Governance Services, part of RiskMetrics Group, said in its report that "the dissident has not met its burden of proving that board change is warranted at Idec. Absent a showing that the incumbent board has failed in some fashion, we find it difficult to support the removal of directors."

Said Glass Lewis: "Shareholders should support management's nominees. In our opinion the current board and executives have created substantial value for shareholders and we believe that the Company has solid growth opportunities as a stand-alone entity."

And to make it unanimous, Proxy Governance weighed in thus: "Given the track record of this board and its management team over the five years since Biogen and Idec merged, as well as significant performance targets to which the company has committed itself through 2010, we believe shareholders will be better served by re-electing the management slate of nominees."

The thing about Icahn is -- he keeps up with these things, and over time can simply wear opposition down. He may have something more to say about BIIB going forward, or he may sell his shares and move on to something else.

He might, for example, (I'm just guessing!) want to liquidate his position in BIIB in order to buy more shares of Yahoo, where his nuisance value is only beginning to manifest itself.