ISS, Glass Lewis Support Bow Street’s Mack-Cali Nominees

(Bloomberg) -- A push to revamp the board of Mack-Cali Reality Corp. from one of its largest investors received a boost Friday with two prominent shareholder advisory firms urging investors to support some its director nominees.

Institutional Shareholder Service Inc. urged shareholders to elect all eight directors nominated by Bow Street LLC, while Glass Lewis & Co. encouraged them to vote for five of its nominees for the 11-member board.

ISS said in a report Friday that, despite the transition risk associated with Bow Street's plans to remove Mack-Cali Chief Executive Officer Mike Demarco and most of its board, several of its nominees have extensive experience in the sector and have expressed a willingness to serve as interim CEO. While the company has made strides in transforming its business, there were serious obstacles to improving its operating performance, including excessive leverage and a development-heavy approach that consumes cash, according to ISS.

Given the apparent inability or unwillingness of the legacy directors to challenge Demarco, Chairman Bill Mack and others on the board, ISS said it saw little reason to preserve a strong minority of legacy directors.

“The dissident has put forward a slate of eight directors, making it a certainty that at least three legacy directors will be elected. These remaining directors can ensure continuity and an institutional connection to past company decisions, to the extent such knowledge is constructive,” ISS said.

Glass Lewis said in its own report Friday that investors should support five of Bow Street's nominees, arguing as well that change was needed at the company to improve its governance. The advisory firm said increased representation for Bow Street on the board would send a strong message to the Mack-Cali-backed directors that the “regressive governance tactics employed over the last year were profoundly misguided.”

“The tools underpinning MCR's playbook appear to have varied widely over the last year, but have included, at the very least, stacked committees, perfunctory governance ‘improvements' and, ultimately, openly conflicted, deeply flawed oversight bodies,” Glass Lewis said. “Against this backdrop, we believe investors should send a clear message to the incumbent board by supporting an expanded selection of Bow Street nominees.”

Mack-Cali ‘Disappointed'

Mack-Cali, a real estate investment trust based in Jersey City, New Jersey, said in a statement it strongly disagreed with the recommendations from the advisory firms, and continued to urge investors to vote for its 11-member slate.

“We are disappointed that ISS and Glass Lewis largely failed to recognize the significant board and governance enhancements Mack-Cali has made over the last year and the company's progress on its portfolio transformation to position Mack-Cali to maximize shareholder value,” the company said.

Akiva Katz and Howard Shainker, managing partners of Bow Street, said they were “gratified” by the recommendations in an email, saying the advisory firms recognized “that Mack-Cali shareholders deserve better.”

Glass Lewis urged shareholders to elect Mahbod Nia and Howard Stern from Bow Street's slate, along with three incumbent directors who were also nominated by the firm, Frederic Cumenal, MaryAnne Gilmartin and Nori Gerardo Lietz. The three incumbent directors were elected to the board last year as part of separate push for change by Bow Street, and were not included in the company's slate.

Bow Street, which owns a 4.9% stake in Mack-Cali, is pushing for change at the company for a second year, arguing it has underperformed and was in need of an overhaul. It argued that without meaningful change on the board, shareholders would never realize fair value for their investment.