Challenge to First Executive Chairman Rejected
Chairman Fred Carr of First Executive Corp. weathered a substantial challenge from two stockholder proposals Friday at the firm’s annual meeting. The Los Angeles insurance holding company simultaneously announced a proposed $250-million public rights offering to shareholders.
Some major institutional investors obviously backed the shareholder proposals and others withheld their votes, but pro-management voters defeated them.
Although the company has a reputation as a leader in the U.S. insurance industry, management has received fallout from unfavorable news about Carr’s close business ties to indicted “junk bond” king Michael Milken, who recently quit Drexel Burnham Lambert.
Oddly, despite the close vote, no one at the meeting took the floor to discuss the proposals before the balloting.
The tally showed that of the 56 million shares voted, only 27 million (48%) supported Carr’s position against a proposal to create a seven-member committee of major shareholders to advise the company’s board.
However, the proponents only garnered 21.3 million yes votes as the balance of 7.7 million abstained.
The other proposal, which could have made it easier for someone to acquire the company, was defeated with a pro-Carr vote of 29.6 million (53%). A total of 18.3 million voted in favor and 8.1 million shares abstained.
If that proposal had passed, First Executive directors would have waived the company’s rights under a five-year “standstill” agreement dated Nov. 9, 1987, that restricts ICH Corp. from increasing or disposing of its 16 million First Executive shares, a 20% stake. ICH, a Louisville-based insurance holding company, has been a Carr backer.
Three other institutions have First Executive holdings of more than 7 million shares. One of them, Dallas-based Rosewood Financial Partners, has been considered a potential suitor and indicated that it would vote for the two proposals.
The vote suggested that two institutions voted against management’s recommendations.
Afterward, beaming over the enthusiastic applause from the crowd at the meeting, Carr shrugged off the closeness of the vote, saying: “Shareholder democracy--it’s terrific.”
He told the session that the stock rights offering, on which the company submitted a prospectus Friday to the Securities and Exchange Commission, is a way of transferring value to its shareholders as well as raising capital.
The offering provides that, for each share in the company, a First Executive stockholder may acquire a package consisting of one share of convertible preference stock and two stock warrants for $15 per package.
He said he expected that a public market in the rights would provide “substantial” value to the shareholders.
Two investment bankers, Drexel and Kidder, Peabody & Co., are to underwrite the sale of the packages, called units.
