Impala Asset Management, the activist investor challenging Harley-Davidson (NYSE:HOG) for the right to have two candidates on the board of directors, has named its nominees. It also says it was the force behind the ouster of former CEO Matt Levatich, who the private equity firm contends was fired and did not resign.

Regardless of whether Levatich was pushed or jumped (companies often allow executives to save face on the way out the door), the real issue for Harley investors is whether the candidates Impala offers are the right ones for the job.

Motorcyclist riding into the sunset

Image source: Getty Images.

An inverse relationship

The PE firm certainly has it right: The board needs a shake-up after allowing the motorcycle maker to spin downward over the course of five years of poor sales performance even as Levatich's compensation rose.

In a Securities and Exchange Commission filing, Impala points out that as the CEO's compensation surged more than 70% over his five-year tenure, reaching $11 million in 2019 from the $6.4 million he was paid when he took over in 2015, adjusted motorcycle operating income declined 20% and the stock underperformed its peers. Shares lost nearly half their value under Levatich's watch.

Impala maintains the board remains "tone-deaf to the plight of shareholders" even after Levatich's ouster, appointing board member Jochen Zeitz, the former CEO of sneaker maker Puma, as acting president and CEO until a replacement can be found. Despite the interim nature of that position, the board awarded him a compensation package of as much as $8.5 million in salary, bonuses, and restricted stock.

The right people for the job?

The activist investor, which owns 1.2% of Harley's outstanding stock, wants to inject new blood into the board, whose existing directors have no relevant industry experience and waited too long to address the company's changing customer demographics. But investors might wonder whether Impala's candidates -- Leo Hindery and Brent Dewar -- are the best for the job.

Hindery is the founder of Trine Acquisition, a special-purpose acquisition company. He's also former president and CEO of Tele-Communications, a cable TV operator that was acquired by AT&T, where he became president and CEO of AT&T Broadband. He's reportedly an avid Harley rider and was a professional race car driver.

Brent Dewar is the former president of NASCAR and a former executive at General Motors for the global Chevy brand.

A media executive who knows his way around a car and an auto executive who understands global markets might not seem to offer much that's different from the hodgepodge of attributes the existing board possesses. However, they're arguably closer to what the motorcycle company needs now as it prepares to introduce two new middleweight motorcycles this year: the Pan American, an adventure-touring style bike; and the Bronx, a so-called "streetfighter" style. Both bikes are smaller than the typical Harley, but still far larger than the 300-cc to 400-cc bikes that are much more popular with today's younger riders. 

The fight to come

Impala rightly contends there is a substantial store of value remaining in the Harley-Davidson brand that is quickly being squandered, but says the coronavirus pandemic is not the right time to present its full case to Harley shareholders. Indeed, the bike maker has shut down most of its production after an employee tested positive for COVID-19.

The PE firm promises to lay out its plan in full at a future date, and investors should carefully view that presentation when it's made to see just how these two nominees fit in with changing the motorcycle company's direction.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.