Dive Brief:
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Ethan Allen shareholders have shaken up the furniture retailer’s board, on Wednesday replacing three directors with people nominated by activist investor Doug Bergeron.
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Board chair and CEO Farooq Kathwari was not reelected, according to a preliminary vote count. Just two of the company’s five nominees were chosen.
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Bergeron, who owns about 5% of Ethan Allen’s stock, in August slammed Kathwari’s leadership and nominated candidates to replace the entire board. He is on the winning slate.
Dive Insight:
With their votes, Ethan Allen stockholders have sent a mixed message, approving nominees advocated by both the company and the investor who has criticized its leadership for months. But they do apparently agree with Bergeron that Kathwari’s time is up.
Under pressure from Bergeron’s campaign, Ethan Allen announced a CEO search in September, though at that point the plan was to have Kathwari, who has led the company for nearly four decades, stick around for a while longer. The retailer said it expected to announce a new CEO no later than June 30, the day Kathwari’s contract ends, and for him to remain a nonexecutive board member after that, until the annual shareholder meeting a year from now.
Wednesday’s vote could speed that up, though.
“With the activist investor gaining effective control of Ethan Allen's board of directors, CEO Farooq Kathwari's contract, which expires on June 30, 2027, is likely to be terminated early,” Telsey Advisory Group analysts led by Cristina Fernández said Thursday.
Ethan Allen didn’t immediately respond to requests for comment regarding Kathwari’s plans, or the company’s plans for Kathwari, following the vote. But Bergeron is already on record as eager to replace him more expeditiously. Last month he urged the board to appoint Stefanie Tsen Ward as interim CEO after the meeting that was held this week. Ward was one of Bergeron’s five nominees but wasn’t elected.
That doesn’t mean she couldn’t step up as CEO. “Ms. Ward brings meaningful experience with brands and retailers, most recently serving as Chief Integrated Retail and Customer Officer at Neiman Marcus,” Fernández said.
In a statement, Bergeron said Wednesday’s result “marks a new chapter in Ethan Allen’s storied history” and said that shareholders had given his team “the mandate to restore accountability, revitalize the business and return Ethan Allen to profitable growth.”
“We will also work with Mr. Kathwari to ensure an orderly transition for Ethan Allen's employees, customers and partners,” he said. “We recognize and appreciate his decades of service to the Company and the role he has played in building Ethan Allen into the brand it is today.”
Ethan Allen releases its fiscal Q1 results on Monday.
