The Forest Laboratories ($FRX) proxy fight has some new wrinkles: Proxy advisory firm Glass Lewis says Carl Icahn (photo) has a point. Or several. But the firm isn't going so far as to back all of the activist investor's nominees to Forest's board, Reuters reports. Only one, Richard Mulligan, won the Glass Lewis stamp of approval.
Then, a few hours after the Glass Lewis statement, another proxy advisor threw its support behind Forest's slate. All 10 nominees. Institutional Shareholder Services contends that Icahn, who now owns 9.2% of the company, "has not demonstrated a compelling case that change at the board level is needed." ISS also isn't convinced the board has been planning inadequately for Forest's patent cliff, as Icahn claims.
"We believe the dissidents have identified several noteworthy issues regarding the company's overall performance," Glass Lewis says in explaining its backing of Mulligan for a board seat. Adding him to the mix might help the board actually consider making real changes, the firm suggests; certainly it would give the company "fresh perspective." And Glass Lewis isn't concerned that Mulligan also serves on other biopharma boards, including Biogen Idec.
Forest, on the other hand, says Mulligan's other posts are a clear conflict of interest. "Because new product licensing and acquisitions are critical to Forest, it simply defies logic to believe that Mulligan could effectively represent the interests of Forest shareholders while simultaneously serving on the board of a competitor pursuing the same products in the same marketplace," a spokeswoman told Reuters.
Part of the reason why Glass Lewis likes Mulligan, however, is that it questions the actual independence of his opponent, Kenneth Goodman. Rather than choosing to put forward an independent presiding director, the board instead chose "a presiding director whose independence is highly questionable." That choice only bolsters Icahn's argument that the company's board is full of "entrenched directors." Moreover, the firm said, "It leaves us feeling highly dubious of the board's ability to enact truly positive corporate governance reforms."