DEFA14A: Ares Capital Corporation Urges Stockholders to Support Board's Director Nominees Despite ISS Recommendation

Ares Capital Corporation is urging its stockholders to vote for the election of Daniel G. Kelly, Jr. and Eric B. Siegel as directors, despite a recommendation from Institutional Shareholder Services (ISS) to withhold support.

Summary

• Ares Capital Corporation is communicating with its stockholders to advocate for the election of Daniel G. Kelly, Jr. and Eric B. Siegel as Class III Directors.
• Institutional Shareholder Services (ISS) has issued voting recommendations that are inconsistent with the Board of Directors' recommendations.
• The Board of Directors believes that the election of Kelly and Siegel is in the best interests of the Company and its stockholders.
• The Board emphasizes the importance and commitment of Kelly and Siegel to the Company.
• ISS's recommendation is based on Ares Capital's governing documents that provide the board with the exclusive power to amend the company's bylaws.
• The Board believes that vesting the power to amend bylaws exclusively with the Board is in the best interests of the Company and stockholders, as directors owe legal duties to act in the Company's best interest, unlike stockholders.
• The company urges stockholders to vote FOR the election of Daniel G. Kelly, Jr. and Eric B. Siegel.
• Stockholders are encouraged to read the complete Proxy Statement dated March 10, 2025, and accompanying materials carefully before making a voting decision.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive as the company is actively defending its board nominees and governance structure. However, the disagreement with ISS introduces a potential challenge.

Positives

• The Board of Directors believes that having Daniel G. Kelly, Jr. and Eric B. Siegel on the board is in the best interests of the company and its stockholders.
• The Board of Directors believes that it is in the best position to consider possible future bylaw amendments and will adopt such amendments only after concluding that such amendments are in the best interests of the Company.
• The company has had the power to amend bylaws vested exclusively with the Board of Directors since its initial public offering in 2004.

Negatives

• ISS has recommended voting against the election of Daniel G. Kelly, Jr. and Eric B. Siegel.
• ISS's recommendation is based on a policy regarding companies where the board has exclusive power to amend bylaws.

Risks

• There is a risk that stockholders may follow ISS's recommendation and vote against the election of Daniel G. Kelly, Jr. and Eric B. Siegel.
• The company's governance structure, specifically the board's exclusive power to amend bylaws, is being challenged by ISS.

Future Outlook

The document focuses on the upcoming election of directors and does not provide specific forward-looking financial guidance.

Management Comments

• The Nominating and Governance Committee and the Board of Directors have determined that the nomination and election of Daniel G. Kelly, Jr. and Eric B. Siegel are in the best interests of the Company and our stockholders.
• Our Board of Directors believes that it remains in the best interests of the Company and our stockholders if the power to amend our bylaws is vested exclusively in our Board of Directors as is permitted by Maryland law.

Industry Context

This announcement reflects a common situation where companies and proxy advisory firms like ISS disagree on corporate governance matters, particularly regarding board powers and shareholder rights. It highlights the ongoing debate about the appropriate balance of power between boards and shareholders.

Comparison to Industry Standards

• The debate over bylaw amendment powers is common, with companies like Ares Capital arguing for board control to ensure decisions are made in the company's best interest, while proxy advisors like ISS often advocate for greater shareholder input.
• Many companies in the financial sector, including Business Development Companies (BDCs) like Ares Capital, face scrutiny from proxy advisors on governance matters.
• The specific governance structure of Ares Capital, with its board having exclusive power to amend bylaws, is not uncommon but is increasingly challenged by shareholder advocacy groups and proxy advisors.

Stakeholder Impact

• The outcome of the director election will impact shareholders, as it will determine the composition of the Board of Directors.
• The company's governance structure and relationship with proxy advisory firms could influence investor confidence.

Next Steps

• Stockholders will vote on the election of directors.
• The company will continue to engage with stockholders to advocate for its position.

Key Dates

Keywords

Ares Capital Corporation, election of directors, proxy statement, ISS, Daniel G. Kelly, Jr., Eric B. Siegel, board of directors, bylaws, governance