A pair of leading proxy advisory firms is divided over what Solera National Bancorp (SLRK) shareholders should do at next week's annual meeting.
Glass-Lewis recently recommended that investors reject a slate of nominees from Michael Quagliano, the Lakewood, Colo., company's biggest shareholder. Institutional Shareholder Services urged investors to withhold votes for eight of Solera's 11 nominees, granting a reprieve to the three newest additions. ISS refrained from endorsing Quagliano's slate.
ISS also declined to throw its support behind eight nominees proposed by Kathleen Stout, a former Solera executive. It is unclear if Glass-Lewis weighed in on Stout's efforts; Solera only included select sections of the report in a recent regulatory filing. Quagliano was equally selective with his references to the ISS review.
Solera's annual meeting is quickly turning into a circus, and the proxy firms have certainly helped to set the stage. Glass-Lewis took aim at the inexperience of Quagliano's nominees, which include his fiancé and his daughter. "We believe there is no justifiable basis upon which to suggest retaining a 28-year old Florida horse farm employee and a 21-year old college student in any way serves the interest of any shareholders other than" Quagliano, the report said.
Quagliano, who owns 23.3% of Solera's stock, has nominated six people, including himself, to join the board. He also has a proposal to shrink the board to five directors. Of those, only Jackson Lounsberry has banking experience listed in Quagliano's filings. The line-up prompted Glass-Lewis to accuse Quagliano of the "brazen intent to craft a board wholly beholden to his own perspectives."
Quagliano has said in prior letters to shareholders that he wants to cut board compensation and launch a companywide review of salaries, while exploring the addition of mobile payment services. Quagliano and Stout have taken issue with the company's underperformance and poor managerial decisions. Both have pointed to restructuring charges Solera incurred after scrapping plans for two branches.
"There is evidence of underperformance and serious governance concerns at the company," ISS said in a portion of its report included in Quagliano's filing. ISS also noted that Solera "underperformed its peers" last year in areas such as return on assets, return on equity and net interest margin.
Solera lost $369,000 in the first quarter after bleeding $656,000 in 2013.
Two of Stout's nominees have banking experience. Dianne Andrews retired as market president at Vectra Bank in Durango, Colo., in 2006. Basil Blume is a consultant who once served as chief operating officer and treasurer at CIC Bancshares.
Stout, who used to oversee Solera's mortgage operations, was terminated last year as part of a cost-cutting effort. She has indicated that one of her objectives is reclaiming her job at the $168 million-asset company.