NEW YORK, March 27, 2018 /PRNewswire/ — Neuberger Berman is a long-term shareholder of Nuance Communications, Inc., and has owned the shares, on behalf of its clients, for over five years.
We are encouraged by the naming of an outsider as the new CEO, and hope that Mark Benjamin can demonstrate the strategic thinking and commitment to shareholder value creation Nuance needs. An outsider’s perspective may bring fresh views that could help unlock the potential of Nuance’s talented employees and world class technology.
We believe this is a pivotal moment for Nuance’s Board to adopt the Board and governance changes that were overwhelmingly supported by shareholders at the last annual meeting.
Since the Board has not addressed the results of the annual meeting, and we have not yet had the opportunity to meet with the incoming CEO, we are sharing our views in the form of a public letter, which follows:
March 27, 2018
Mark Benjamin, Incoming CEO, and
Members of the Board of Directors
Nuance Communications, Inc.
Dear Mark and Board Members:
As a committed long term shareholder, we congratulate Mark on his new role and look forward to working with him in the near future.
Leading Nuance will be an exceptional opportunity. Mark will be inheriting a company with innovative technologies and leading positions in many fast growing markets. Nevertheless, there are many challenges stemming from expensive acquisitions, strategic missteps, and lack of accountability, which resulted in a lost decade of shareholder returns.
We believe that Nuance’s poor performance was in large part attributable to a Board of Directors that deferred to a strong-willed CEO, whose excessive compensation failed to reflect the lack of value created for the company’s owners. Enhancing shareholder value and rebuilding investor trust at Nuance will require sound corporate strategy, financial discipline, and long-overdue changes to its corporate governance.
At the Annual Meeting of Shareholders held on February 28, 2018, Nuance shareholders spoke unequivocally:
- Over 90% of votes cast by shareholders opposed the pay program, the fifth time in six years that shareholders voted against a “say on pay” resolution at Nuance, which our analysis suggests was the third worst such vote ever for any US public company.
- A shareholder proposal to call a special meeting received overwhelming support of 94%, one of the highest levels of support for shareholder proposals on record.
- A definitive majority of 60% of the shares were cast against Lead Director Robert Frankenberg, the 21st poorest director vote of over 17,100 such recent votes collected by MSCI.
- Director Kathryn Martin received a vote that ranks her in the bottom 5% of all director votes, after receiving a vote in the bottom 1% of votes last year, due to a persistent conflict of interests with the company.
By acting swiftly and decisively, both Mark and the Board can demonstrate their commitment to a new era of improved governance and accountability at Nuance. Neuberger Berman believes the Board should:
- Adopt a shareholder right to call a special meeting where shareholders will have the opportunity to nominate new directors. Nuance shareholders should not have to wait another year for this necessary change to be implemented.
- Request that Lead Director Robert Frankenberg accept shareholders’ vote and leave the Board. We believe Mr. Frankenberg’s continued service is unacceptable when a decisive majority of 60% of shares voted against him.
- Request that Director Kathryn Martin accept shareholder’s repeated opposition to her Board seat and resign. Wilson Sonsini, the law firm where Ms. Martin serves as Chairwoman, continues to provide services to Nuance for M&A and shareholder activism defense, a clear conflict of interest.
- Reform Nuance’s executive pay practices by replacing all members of the compensation committee and the Board’s compensation consultant, and design an executive compensation plan that is closely aligned with long-term shareholder value creation.
Implementing those changes, which were all overwhelmingly supported by Nuance shareholders, will be a true testament to Mark’s and the Board’s commitment to delivering shareholder value and instilling a new culture of accountability at Nuance.
We wish Mark success in his new role and invite him to meet with us and other shareholders at his earliest convenience.
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Sincerely,
Amit Solomon
Portfolio Manager
Intrinsic Value Strategies
About Neuberger Berman
Neuberger Berman, founded in 1939, is a private, independent, employee-owned investment manager. The firm manages a range of strategies—including equity, fixed income, quantitative and multi-asset class, private equity and hedge funds—on behalf of institutions, advisors and individual investors globally. With offices in 20 countries, Neuberger Berman’s team is approximately 1,900 professionals. For five consecutive years, the company has been named to Pensions & Investments Best Places to Work in Money Management survey (among those with 1,000 employees or more). Tenured, stable and long-term in focus, the firm fosters an investment culture of fundamental research and independent thinking. It manages $295 billion in client assets as of December 31, 2017. For more information, please visit our website at www.nb.com.
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