Shareholders group challenges Farmer Bros. board of directors TORRANCE: Coffee supplier’s leaders are threatened with personal liability for any breaches of duty to stockholders. By Muhammed El-Hasan
Eight current and past directors at Farmer Bros. Co. may have to fend for themselves when faced with a legal or administrative challenge to their governance of the company if shareholders approve a dissident investor’s proposal. Franklin Mutual Advisers submitted the proposal on Friday to the Torrance coffee roaster and distributor to deny the eight individuals any financial help in fending off or paying penalties for such challenges. The proposal would cover “violations of law or breaches of duty” allegedly committed between July 2002 and the date the resolution would be passed. The proposal, by the company’s largest institutional investor and one of its most vocal critics, came about a week after another dissident investor submitted a proposal to restore cumulative voting rights to ease the election of independent directors. Led by Franklin Mutual, dissident investors have spent more than a year pressuring the company’s management to provide more information on various issues including how it plans to spend about $300 million in cash holdings. Some investors also have demanded the coffee firm become an investment company because it holds so much cash. Some of the dissidents have suggested the Farmer Bros. management may be running the company for narrow personal gain instead of for the benefit of all shareholders. Company officers own or control 52 percent of the stock, putting them squarely in control of any proxy fight. The company repeatedly has denied any wrongdoing, saying it meets or exceeds legal disclosure requirements. A company spokesman declined to comment on the proposal Friday. “It’s just a hope that the directors would be sensitized even more than they are to requests being made (by) outside shareholders,” said Bradley Takahashi, a Franklin Mutual vice president, on the proposal’s purpose. July 2002 was chosen as the starting date for the period of suspended director indemnification because “that’s when we first started making specific requests to the company’s management and to the board for information relating to the possible application of the Investment Company Act (of 1940) to the company,” Takahashi said. The company could still indemnify directors if “they succeed on the merits in defense of any claim or . . . if a court determines the director met the applicable standards of conduct,” the proposal states. The eight current or former directors named in the proposal, including chairman Roy F. Farmer and his son CEO Roy E. Farmer, would not be allowed to vote on this proposal at the annual shareholder meeting later this year, according to the proposal. Farmer Bros. stock dropped $2.50 Friday on Nasdaq to close at $333.00. The stock was at $17 a share in 1980. Publish Date:August 2, 2003
© Copyright 2003 Copley Press, Inc.
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