Thursday, September 21, 2006

Comfy Seats

Amerigon Incorporated (ARGN) is a small company that develops and sells car seat heaters. Much as I love toasty bucket seats on a winter day, I’m going to pick on these guys just a little. There’s nothing terrible here, but Amerigon recently sought shareholder approval to “stagger” (the legal term is "classify") its board of directors.

A staggered board is a time-honored, and probably highly effective, antitakeover technique in which directors are divided into “classes” – usually three – and only one class stands for election each year. This prevents anyone from taking control of a company by replacing a majority of its directors in one gulp.

I’m irked at Amerigon because its proxy disclosure purports to discuss “considerations for and against” the proposal, but the against part is way too skimpy. A staggered board is, deliberately, an entrenched board, and many think this is bad for shareholders. The proxy language touches on this, but gives no sense of how controversial the practice has become.

I prefer this proxy language from Qualcomm Incorporated (QCOM), which recently "de-staggered" its board:

Some investors view classified boards as having the effect of reducing the accountability of directors to stockholders because classified boards limit the ability of stockholders to evaluate and elect all directors on an annual basis. The election of directors is a primary means for stockholders to influence corporate governance policies and to hold management accountable for implementing those policies. "

Now Amerigon, if you'd really wanted to give shareholders the reasons to vote against your proposal, that's what you would have said.

That concludes the substantive part of this post. But Amerigon’s 10-K prompts me to bestow on the firm this blog’s treasured Wal-Mart Award for Unabashed Outsourcing:

During 2002, we completely outsourced production to lower-cost countries in order to be price competitive and expand our market beyond the luxury vehicle segment."

Congrats, Amerigon. Not that outsourcing is unequivocally evil. But, given the loss of American jobs, shouldn’t a company have the decency to sound just a wee bit shamefaced about it?

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