Recommending that at least 5 of the Incumbent Rite Aid BOD Members need to be replaced
Los Angeles, CA -- (ReleaseWire) -- 10/03/2018 --Contact:
On Thursday, 27 Sep, Rite Aid released their latest earnings report and finally filed the proxy for the 30 Oct annual meeting. The good news is that there are green shoots of growth in both the Pharmacy and Pharmacy Benefit Management (PBM) operations. The bad news is the money and time wasted on the Albertsons Merger ($19 million in the past quarter, $34 million in total), the minimum magnificent changes proposed for the Board of Directors (BOD), the proposed appointment of an incumbent director to the now separated Chairperson of the Board position, and no change Rite Aid management.
I'll go into detail below why I believe the changes proposed are insufficient and why you should vote "Against" at least 3 additional incumbent BOD members (I'd suggest Marcy Syms, Joseph Anderson, and Michael Regan (Marcy Syms is on the Compensation Committee, Joseph Anderson Chairs the Governance and Nomination Committee, Michael Regan is on the Compensation and Audit Committee and was on the Albertsons Negotiation Committee).
Why the proposed BOD changes are minimum magnificent:
1st: Since no change would have been unacceptable, changing 3 BOD members is the minimum needed to show "change" while potentially allowing the status quo to continue for at least another year. With the majority of the members unchanged, there is no way for shareholders to drive change through the new BOD members if the incumbent BOD members continue business as usual.
2nd: I believe the skillsets of the incumbent BOD members are insufficient for the current Retail and Healthcare environment. At most we have 2 BOD members out of 9 in these most critical areas and I believe that Marcy Syms retail experience and Kevin Lofton healthcare experience isn't particularly relevant to the current industry environments. The proxy talks about the need to have BOD members who know the company as an argument against bigger changes right now, despite the fact that they have done little to change the broken company culture, which continues to affect revenues/profits at our stores. I believe navigating the retail and healthcare industry changes is a much bigger priority right now.
We need BOD members who know the current state of the retail and healthcare industries, know the players to facilitate strategic discussions, and who can think creatively with regard to strategic options. I'm actually quite flabbergasted that I nominated someone with these credentials, Brittain Ladd, and the Rite Aid nominating committee chose not to add him to the BOD. I'd recommend shareholders re-nominate Brittain at the Annual Meeting.
Why the proposed appointment of an incumbent director to the now separated Chairperson of the Board position is a bad idea:
The purpose of separating the positions is create a structure that holds the Chief Executive Officer (CEO) accountable for their decisions and performance. How likely is Mr. Bodaken, an incumbent director that has already approved of CEO decisions and performance (that shareholders disagreed with), to suddenly start holding the CEO accountable? The named Chairperson of the Board should be an outsider, someone who can independently analyze the company performance and "corporate culture" and repair it.
Why a change in Rite Aid management is justified:
Given the green shoots in both the Pharmacy and PBM segments, is the BOD assessment that John Standley is "best situated to serve as Rite Aid's Chief Execution Officer" based on his extensive industry experience and in-depth understanding of all aspects of the Company the right way to go. Based on the reasons below, I think John Standley has shown poor leadership and the right way to go is let John Standley finish his yearly contract and then not renew it.
1st: John Standley was the strongest proponent of the flawed Albertsons merger agreement which resulted in wasted time and $33 million in wasted shareholder resources. I'm a firm believer that one should stand behind their ideas/decisions. Instead of standing behind his idea/decision of tying up with Albertsons, John Standley made sure to get a $3 million retention bonus as a consolation prize. This self-serving retention bonus subsequently made it more difficult to negotiate a contract with Southern California Rite Aid Pharmacy employees.
2nd: The current Rite Aid culture and internal controls allowed a VP of Advertising to steal $5.7 million over more than a decade. The CEO is responsible for the company culture and internal controls.
3rd: John Standley has spent little effort focusing on the effective operation of the Pharmacy stores (He's been busy trying to sell the company and accelerate his stock options) until just recently which is why Rite Aid is in the position it is now. We're glad that this is now a priority but it's clearly an area John Standley has NO in-depth understanding of.
4th: Wall Street has shown no confidence in John Standley's leadership as evidenced by the current share price, and the stock price will not be marked up by Wall Street until they see significantly more change than the "band aid" placed on a deep wound currently.
5th: Rite Aid plans to right size the corporate processes for the now smaller footprint. Shouldn't this effort include rightsizing Rite Aid Management salaries for the now smaller earnings potential? Shouldn't we see significant Corporate downsizing, given we are half the size we used to be?
6th: If you've lost the respect of your stakeholders (your employees and your shareholders) and aren't succeeding with your customers compared to your peers, it's a clear sign it is time for you to go.
Individual shareholders holding over 37 million shares (registered at https://sites.google.com/view/rightriteaid) believe there should be greater changes than those proposed in the proxy statement for the Oct 30th Annual Meeting. You can do that by voting "Against" the BOD nominations of Marcy Syms, Joseph Anderson, and Michael Regan.
We're interested in communicating with other shareholders to hear their opinions/rationale so we can speak with a united voice.
Feel free to contact me if you have any questions.
Individual Rite Aid Stockholder