Capitol Bancorp Ltd. must really want to keep its board staggered.
An unnamed shareholder is calling for the board to be
The $2.5 billion-asset company said in a Securities and Exchange Commission filing on Tuesday that it initially sought to exclude the proposal from its proxy statement and asked the SEC in early November to not take action against the company should it do so. On Nov. 29, the SEC told Capitol it would grant no such relief.
The proposal to declassify board was made at Capitol's annual meeting last week. The company adjourned the meeting and will take up the proposal when the meeting reconvenes Jan. 18.
In the Tuesday filing, Capitol included the unnamed shareholder’s supporting statement for declassification.
“The elimination of the staggered board would require each director to stand for election annually,” the supporting statement reads. “We believe that this annual accountability would serve to keep each director closely focused on performance and the maximization of shareholder value. Moreover, the declassification of the board will provide the shareholders with a greater voice in the governance of Capitol.”
Observers have said that any action to reshape the board would need to be done quickly, as Capitol’s future is in jeopardy without a significant capital infusion. The company, which has dual headquarters in Lansing, Mich., and Phoenix, had negative equity of $93.5 million at the end of third quarter, despite bringing in more than $150 million in proceeds from the sale of banks in the last few years. Several of its bank units are also operating under prompt corrective action directives, agreements with regulators that are often described as the last public “or else” warning.
Several observers said earlier this week that Capitol’s shareholders are disgruntled because stock once traded above $42 a share and on Tuesday closed at a nickel.
Still, Capitol is recommending its shareholders vote against the proposal. “While Capitol’s board of directors agrees with the proponent’s premise that the board is, and should be, accountable to Capitol’s shareholders, there are other, more effective measures in place to assure Board responsiveness to shareholder concerns,” its response reads.
The company added that the change would shift the company’s attention to short-term concerns. Also, a classified board protects shareholder value in the event of a hostile takeover.
As it stands now, Capitol's directors serve a three-year term and about a third of the board stands for re-election each year.
