Independent proxy advisory firm Glass Lewis & Co. is backing three Paulson & Co. Inc. candidates for the board of Detour Gold Corp. but stopped short of recommending all of the dissident shareholder’s nominees.
New York-based Paulson, which owns roughly 5.7 per cent of Detour’s shares, has been agitating for a broad overhaul at the struggling junior gold company since the summer and has proposed replacing eight out of nine directors, including interim chief executive Michael Kenyon and chairman Alex Morrison. Toronto-based Detour and Paulson agree two of the company’s board members should be replaced.
“We ultimately see validity in Paulson’s central thesis that, for substantive change to take hold at the company, certain of the core and long-term directors who have presided over value destruction and overseen technical failures of prior mine plans need to be replaced,” Glass Lewis wrote in a report released this week.
Glass Lewis said while Paulson “has established a case for incremental change to the board,” beyond what Detour is proposing, the hedge fund has “not provided an in-depth operating plan, nor nominated a full slate of sufficiently qualified director candidates to warrant support for the dissident’s entire slate.”
Glass Lewis said chairman Mr. Morrison should step down, given “subpar performance and governance concerns arising during his tenure” and said he should be replaced by Paulson nominee Dawn Whittaker, a former chair of Kirkland Lake Gold Inc.’s corporate governance committee.
“We believe her addition to the Detour board in place of Mr. Morrison would improve the company's governance profile and accelerate the positive changes afoot at the company,” Glass Lewis wrote.
In a release, Detour disagreed with some of Glass Lewis’s conclusions.
“Glass Lewis fails to consider the valuable and irreplaceable role Mr. Morrison provides with regards to board continuity and his specific experience and skill set,” the company said.
Glass Lewis said it believes interim CEO Mr. Kenyon should stay in his position for now and keep his board seat. His role “seems critical given his experience with Detour over the last decade,” the proxy advisory firm wrote, and “keeping that board seat warm for the new CEO who is to be hired by the reconstituted board in the next few months seems a reasonable approach to us.”
A special meeting of Detour’s shareholders is scheduled for Dec. 11, when results of the proxy contest will be made public. Proxy advisory firms are influential in these votes since many institutional shareholders rely on their recommendations.
“A number of large shareholders have already voted for wholesale change to the board,” Paulson wrote in a release.
Shareholder James Rasteh, principal with New York-based Coast Capital Management, said he had voted for the Paulson slate.
“We believe that the current management led by Michael Kenyon has been very destructive for this company,” Mr. Rasteh said in an interview.
David Neuhauser, managing partner with Northbrook, Ill.-based Livermore Partners, which is also a shareholder in Detour, said in an e-mail to The Globe and Mail earlier in the week that Detour’s management and board “need to be removed.”
Rival proxy advisory firm Institutional Shareholder Services late last week came out in full support of Detour’s proposed slate of directors.