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Business Litigation Alert: "Refreshing the Board of Directors - Lessons from Luby’s Effort to Save the Lu Ann Platter with a Board Shakeup"

The new year often brings the opportunity for change.  For any business entity, it is a great time to take a closer look at your company to examine what is working and change what is not.

One item to consider in 2019 is whether to refresh your board of directors.  That is exactly what Houston-based restaurant chain Luby’s recently announced with changes to the company’s board taking effect this year (article here).

Of course, Luby’s decision to replace two incumbent directors with two independent directors comes on the heels of a proxy fight launched by New York hedge fund Bandera Partners, an “activist” investor group that sought to place four of its nominees on Luby’s board and to oust Luby’s existing CEO and president.  While Luby’s vigorously opposed Bandera’s slate of nominees, it recognized that some change was warranted.  According to the statement from Luby’s, the changes were in response to “shareholder feedback” and are designed to bring fresh perspectives to the company’s board. 

Ironically, Luby’s ended up winning the proxy fight with Bandera as a majority of shareholders rejected Bandera’s slate of nominees (article here).

The lesson here, however, is that regardless of whether change is caused by outside forces or inspired by internal decision-making, it is important for all companies to examine their own boards to ensure they are as effective as possible.

  1. Consider the background of each board member.  Do your board members bring the right mix of experience to the table?  Is there something missing that could really bring a different perspective to your board?  Consider who might be retiring soon and what kind of director you would want to replace them.
  2. Talk to your shareholders.  It is critical that you are attuned to shareholders priorities and concerns. Their feedback can help guide your next steps and shape any necessary corporate governance changes.
  3. Make measured adjustments.  Drastic change is not always the best option, but implementing small, meaningful changes over time can help to improve the organization without a major disruption. 

A refresh can often be a very good thing, bringing new ideas and new ways of doing things.  This does not have to mean starting completely over, but rather critically examining what needs to be tweaked to make sure your board is fine-tuned and positioned for future success.

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