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Harley-Davidson Proxy Fight Ends With a Whimper

By Rich Duprey – Apr 3, 2020 at 11:05AM

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Activist investor agrees to withdraw board nominees and not oppose any of the existing directors.

The proxy battle for Harley-Davidson's (HOG -2.90%) sclerotic board of directors ended before it barely even began. 

A private equity (PE) fund was seeking two seats on the motorcycle maker's board. It capitulated to Harley's recommendation to wait until after the annual shareholder meeting. The two sides could then negotiate putting a single nominee on the board.

Investors who hoped a proxy battle would shake up the board -- which has no motorcycle industry experience to reverse the protracted slide in sales -- will need to wait longer for any change.

Motorcycles parked in a row.

Image source: Getty Images.

Who are you?

The nominees offered by Impala Asset Management weren't necessarily the right candidates for the task; they had at best a tangential relationship with motorcycles and Harley-Davidson's customer demographic. But they were better than the currently constituted board.

Existing directors hail from disparate backgrounds and include executives from digital entertainment; LED lighting and solar power; clothing companies; a not-for-profit consultancy; engine and aircraft manufacturers; the Bill & Melinda Gates Foundation; and Chipotle Mexican Grill's CEO.

The activist investor's candidates were a former cable TV executive, who was also a professional race car driver, and the former president of NASCAR and executive at General Motors.

The deal worked out with Harley-Davidson mandates Impala to offer different candidates for the company to consider. Hopefully, they will find someone with actual relevant experience.

Do whatever is asked

The proxy settlement between Harley and Impala requires the PE firm to withdraw its nominees and, after the shareholder meeting, submit two names for consideration to fill a slot as an independent director. The position will be for a new seat created; it could also come from an existing director choosing to step down.

However, there's no guarantee Impala's nominee will actually make it to the board, because Harley will also get to nominate two candidates; from the four names, one will be appointed to serve. So it could be that a Harley pick gets a seat on the board, albeit with Impala's input.

Impala also agreed to continue owning at least 1% of Harley-Davidson stock (it currently owns less than 2%) and will fully support the slate of candidates the bike maker has for the board. Moreover, the investor is also required to support Harley's shareholder proposals that are up for a vote at the annual meeting, including a shareholder ballot access initiative.

Having a say in the matter

The proposal would give any investor, or group of investors, who owns at least 3% of Harley-Davidson stock for at least three years the right to nominate up to 20% of the director nominees for the board.

While proxy access is a rarely invoked provision, more companies are adopting such initiatives because they're seen as making boards more accountable to shareholders. The thinking is boards become more judicious in making decisions that affect the company when this type of initiative is invoked.

Impala would not qualify for the proxy access provision because it doesn't hold the requisite threshold of stock, although it has been a Harley investor at various times since 2008.

Go along to get along

The acquiescence by Impala also means Jochen Zeitz will continue as the interim CEO with the exorbitant $8.5 million compensation package the PE firm originally objected to when he was appointed following the ouster of then-CEO Matt Levatich. 

Zeitz is a former executive of sneaker maker Puma who was reportedly one of the driving forces behind Harley-Davidson's LiveWire electric motorcycle as part of an overall sustainability drive. The overpriced motorcycle has generated few sales or helped slow the decline in traditional bike sales.

Impala will be paid $425,000 to compensate it for its proxy efforts. No date has been set yet for Harley's annual meeting, but it was held in May last year. The new director to be agreed on them will be seated by July 31.


Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Chipotle Mexican Grill. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Harley-Davidson, Inc. Stock Quote
Harley-Davidson, Inc.
$37.54 (-2.90%) $-1.12
General Motors Company Stock Quote
General Motors Company
$35.48 (-5.08%) $-1.90
Chipotle Mexican Grill, Inc. Stock Quote
Chipotle Mexican Grill, Inc.
$1,557.52 (-1.95%) $-30.96

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