Major Setback for Riggio in Barnes & Noble Proxy Fight

NYTimes.com:

Barnes & Noble sustained a setback on Monday when a powerful proxy advisory company endorsed directors proposed by the billionaire investor Ronald W. Burkle over the company’s own slate, which included its chairman, Leonard S. Riggio.

The endorsement by Institutional Shareholder Services could be crucial, coming just a week before the annual shareholder meeting on Sept. 28. Some large institutional investors are required to vote their shares in accordance with I.S.S.’s recommendations. ...

In its 25-page report, Institutional Shareholder Services supported Mr. Burkle’s contention that Barnes & Noble’s corporate governance needed to be improved.

Yucaipa raised questions about the company’s executive pay practices and some of its deal-making, including the purchase of a college bookstore business owned by Mr. Riggio. Investor lawsuits about that deal are pending.

“We believe the dissidents have demonstrated a compelling case that change in the BKS board is warranted,” I.S.S. analysts wrote, referring to the company by its stock symbol.

The report also pointed to the slide in Barnes & Noble’s stock price as another reason for change. Shares in the company have tumbled 28.9 percent in the last year. ...

Mr. Riggio, who fashioned his empire starting with a single Manhattan bookstore 39 years ago, argues that the company has a promising future running bookstores while expanding in a digital marketplace anchored by devices like its Nook e-reader. But Mr. Burkle says the company’s strategy needs change, though he has declined to elaborate. ...