DEFA14A: Consolidated Water Defends Director Nominees Amid ISS and Glass Lewis Recommendations

Consolidated Water urges shareholders to vote for the re-election of its director nominees, disputing recommendations from ISS and Glass Lewis to withhold votes.

Summary

• Consolidated Water Co. Ltd. is addressing concerns raised by Institutional Shareholder Services (ISS) and Glass Lewis regarding the re-election of three directors: Linda Beidler-DAguilar, Brian E. Butler, and Leonard J. Sokolow.
• The company strongly disagrees with the recommendations to withhold votes from these nominees and urges shareholders to vote FOR their re-election at the May 28, 2024 Annual General Meeting.
• ISS and Glass Lewis raised concerns about Ms. Beidler-DAguilar's attendance record, Mr. Butler's role in board refreshment and gender diversity, and Mr. Sokolow's multiple directorships.
• Consolidated Water defends Ms. Beidler-DAguilar's attendance, noting that she missed one meeting due to a short notice conflict and has attended 87% of meetings since November 2018, and has committed to attending at least 75% of meetings in 2024 and beyond.
• The company argues that Mr. Butler's experience is valuable and that the board already has significant diversity, with over 50% of non-executive members identifying as female or a minority.
• Consolidated Water notes that Mr. Sokolow has resigned from one directorship and is now within ISS's acceptable parameters for additional board directorships.
• The company emphasizes the importance of each director's expertise and contributions to the board's effectiveness.
• Shareholders are encouraged to vote FOR all proposals, and can change their vote by voting again before the meeting.

Sentiment

Score: 7

Explanation: The document is defensive, aiming to reassure investors and counter negative recommendations from proxy advisors. While the company presents a positive view of its directors and governance, the need to address these concerns suggests underlying issues.

Positives

• Linda Beidler-DAguilar has committed to attending at least 75% of board meetings in 2024 and has attended 100% of meetings to date in 2024.
• The company emphasizes the board's existing diversity, with over 50% of non-executive members identifying as female or a minority.
• Leonard J. Sokolow has resigned from one directorship, addressing concerns about multiple board positions.
• The company returned approximately $5.5 million to shareholders in the form of dividends and increased the stock price by over 100%.

Negatives

• ISS and Glass Lewis have recommended withholding votes for three director nominees.
• Linda Beidler-DAguilar did not meet the 75% attendance threshold for board meetings in 2023, attending 69% of aggregate meetings.
• Glass Lewis raised concerns about board refreshment and gender diversity in relation to Brian E. Butler's position.
• ISS initially raised concerns about Leonard J. Sokolow serving on too many public company boards.

Risks

• Failure to re-elect the director nominees could diminish the capability and effectiveness of the board.
• Negative shareholder sentiment following the ISS and Glass Lewis recommendations could impact the vote outcome.
• The company's arguments may not be persuasive enough to sway shareholders who typically follow ISS and Glass Lewis recommendations.

Future Outlook

The company expresses no specific future outlook beyond urging shareholders to vote for the director nominees.

Management Comments

• The Company strongly disagrees with the recommendations to withhold votes from Linda Beidler-DAguilar, Brian E. Butler and Leonard J. Sokolow for re-election to the Company's Board of Directors.
• The Board believes that the failure to re-elect Ms. Beidler-DAguilar will diminish the capability and effectiveness of the Board and negatively impact the Board's progress with respect to diversity and inclusion efforts.
• The Board believes that the failure to re-elect Mr. Butler based upon concerns relating to board refreshment and gender diversity would not only be unwarranted, but would diminish the capability and effectiveness of the Board.
• The Board believes that the failure to re-elect Mr. Sokolow will diminish the capability and effectiveness of the Board, and cause the Board to operate without the benefit of an audit committee financial expert unless or until another individual with similar qualification is identified.

Industry Context

This announcement reflects the increasing scrutiny on corporate governance practices, particularly regarding board diversity, refreshment, and director independence, by proxy advisory firms like ISS and Glass Lewis.

Comparison to Industry Standards

• ISS and Glass Lewis recommendations are influential in shareholder voting, and companies often respond to their concerns to ensure director re-election.
• The focus on board diversity aligns with Nasdaq's diversity rule, which requires listed companies to disclose board diversity statistics.
• The concerns about director attendance and multiple directorships reflect common governance standards aimed at ensuring directors have sufficient time and attention to dedicate to their board responsibilities.
• Comparable companies such as American Water Works Company and Essential Utilities also face scrutiny regarding board composition and governance practices.

Stakeholder Impact

• Shareholders are directly impacted by the outcome of the director elections.
• Employees could be indirectly affected by changes in board composition and governance.
• The company's reputation and investor confidence could be influenced by the voting results.

Next Steps

• Shareholders will vote on the re-election of directors at the Annual General Meeting on May 28, 2024.
• The company will monitor the voting results and potentially engage with shareholders to address any remaining concerns.

Key Dates

Keywords

Consolidated Water, Proxy Statement, Director Election, ISS, Glass Lewis, Board of Directors, Shareholders, Corporate Governance