Banc of California in Irvine, under pressure to improve corporate governance, announced a series of moves designed to increase accountability among officers and directors.
The $11.2 billion-asset company also said in a press release Wednesday that Richard Lashley, an activist investor, will take over a board seat that had been held by former CEO Steven Sugarman. Lashley is a managing principal at PL Capital Advisors, which owns about 6.9% of Banc of California’s stock.
Steven Sugarman resigned as chairman and CEO last month.
Banc of California’s board made a number of corporate changes, including adoption of a policy that tightens controls on the outside business activities of officers and employees. The new policy bars nonemployee directors from engaging in outside business activities that “create an actual or apparent conflict of interest.”
Moreover, the board revised the company’s stock-ownership guidelines, increasing the amount of stock or stock equivalents each nonemployee director must hold. Directors also changed the standard for calling for a special meeting from a third of the board to a minimum of two directors.
Banc of California said that its board had revised director compensation, too.
The moves comes just days after another large investor launched a proxy battle in hopes of taking two board seats at the company’s next annual meeting.
Legion Partners Asset Management in Beverly Hills, Calif., disclosed in a recent regulatory filing that it will nominate Roger Ballou, a former chairman of Fox Chase Bancorp, and Marjorie Bowen, a retired investment banker, for director posts. Legion, which owns about 6.6% of the company’s stock, also wants the company to adopt a simple majority vote to amend corporate bylaws.
Legion expressed "serious concerns" about Banc of California’s corporate governance, including the possibility of related-party transactions. The investor has pushed in recent weeks for the board to hire an independent financial adviser and form a special committee "to consider all strategic alternatives … including a possible sale."
Banc of California has been battling credibility issues since October, when an anonymous blogger claimed that Sugarman had ties to Jason Galanas, a Los Angeles financier who was charged last year with defrauding investors. The company has also been hit with claims of questionable related-party transactions.
Banc of California said in an Oct. 18 press release that it had launched an independent investigation and found the blogger’s claims to be groundless.
The company later disclosed that the release had “inaccurate” information, notably that management — and not the board — had authorized the probe. The release also characterized the investigation as independent when the initial law firm involved had previously represented Sugarman and the company.
Banc of California said last month that a separate investigation initiated by its board — and handled by a different law firm — had so far found no evidence that Galanas had "any direct or indirect control or undue influence over the company." That investigation also found no indication that "any loan, related-party transaction or any other circumstance has impaired the independence of any director."
The newly announced truce with PL Capital should take some pressure off the company. In exchange for the board appointment, PL Capital agreed to back the company’s 2017 board appointees and to reject “any stockholder’s nominations for directors not approved and recommended by the board.”
PL Capital, among other things, also agreed to refrain from building a stake above 10% or to “propose or participate in certain extraordinary corporate transactions involving the company.”
The arrangement "is consistent with our commitment to carefully consider constructive input from our stockholders,” Robert Sznewajs, Banc of California’s chairman, said in the release. The investor “brings a wealth of expertise in the banking industry and corporate governance, and we are confident he will help us further our focus on the company's financial performance and profitability."
Banc of California, which has held its annual meeting in mid-May in recent years, also made announcements tied to a pair of directors.
The company said Chad Brownstein, its vice chairman, had decided to retire. Brownstein, who was 43 when the company filed its last proxy statement, is CEO of a natural resources investment company.
Halle Benett, however, informed the company last week that he will stand for re-election at the annual meeting, reversing a decision he made late last year to step down. Benett, who was 49 when the company filed its last proxy statement, is head of financial services investing at Melody Capital Partners.