180 Degree Capital Corp. Issues Public Letter To The Board Of Directors Of Comscore, Inc.
$SCOR
To the Board of Directors of SCOR,
It is apparent to us that you, the Board of Directors, along with SCOR’s preferred stockholders continue to be intent on looting SCOR’s balance sheet for collective personal gains at the expense of the employees and common stockholders of SCOR. We strenuously object to this behavior and demand SCOR take concrete actions towards correcting these issues.
Before we get into the specifics, let’s revisit the performance of SCOR’s common stock since the preferred stockholders invested in SCOR:
Total Return
3/10/21 – 4/18/23SCOR-65.7%Russell 2000 Index-19.4%S&P 500+10.1%
To be clear, we have a high level of respect for the three preferred stockholders, but we are long past the point of appealing to them to make decisions designed to enhance value for all. We believe you, SCOR’s Board, have failed in your duties.
1.SCOR should not be permitted to pay dividends on preferred stock through the issuance of additional preferred stock.
In our previous public letters issued on May 17, 2022, May 25, 2022, and March 6, 2023, we suggested at certain prices, the preferred stockholders should be willing to take common stock instead of cash for dividends. This step would help management to preserve cash to invest in the business and would show alignment with common stockholders. We recognize that an amendment to the certificate of designation for the Series B Preferred Stock is required to enable such payments in stock. Unfortunately, the preferred stockholders and SCOR’s Board then felt the need to complicate things and look for further ways to reward themselves. That said, modifying the existing Series B Preferred Stock to include the ability to pay dividends through the issuance of additional Series B Preferred Stock is completely unacceptable. Specifically, SCOR’s Board has publicly proposed allowing SCOR to pay dividends on its Series B Preferred Stock in the form of common stock if its trading price falls below $2.00 per common share, and in the form of additional Series B Preferred Shares if its trading price is above $2.4719 per common share. Such a structure sends the following message to common stockholders: SCOR’s Board and Preferred Stockholders believe SCOR’s common stock is undervalued below $2.00 per share and is overvalued above $2.4719 per share.
Under what scenario would the board of directors of a company allow such a collar to be put in place on its stock? These missteps occur because the Board of SCOR is representing its preferred stockholders rather than its common
stockholders as is required under Delaware Law. Cerberus, Liberty and Charter essentially state that at prices above $2.4719 per share they are not interested in owning more common stock and would rather compound the interest SCOR is required to pay annually to holders of Series B Preferred Stock.
While SCOR’s Board has proposed having its disinterested directors, or those directors who are not nominated by or affiliated with the preferred stockholders, determine the form of any future dividends on its Series B Preferred Stock, we are not convinced that those purportedly disinterested directors truly represent the interests of all stockholders of SCOR. The Board’s “solution” of potentially paying dividends in preferred shares only serves to compound the imbalance created by the capital structure that is so lopsided in favor of the preferred stockholders. You can't make it up.
If we had the conviction the Lead Independent Director is committed to doing what is best for the Company, we would be less concerned; but that’s hardly the case. We are instead convinced that SCOR’s current Lead Independent Director, Brent Rosenthal, is a proxy for the preferred holders, does not have common stockholder interests in mind, and cannot deliver on actions that benefit all owners. The fact that he was paid an egregious amount of compensation (as detailed later in this release) for service as a member of SCOR’s Board, particularly in recent years when SCOR’s common stock has declined in value by more than 90%, makes us question whether Kathi Love, the Chair of SCOR’s Compensation Committee, is truly a disinterested and/or independent director who represents the interests of common stockholders.
We strongly urge SCOR to not permit any preferred dividends through issuance of additional Series B Preferred Stock, full stop. To be clear, we are supportive of the ability to pay dividends on Series B Preferred Stock in common stock, which will align interests. We are supportive of increasing the incentive compensation pool for employees. We are not looking for ways to reduce the economics for the preferred stockholder's economics. But Cerberus, Charter and Liberty have shown complete disdain for common stockholders since their arrival, and now the Board is contemplating paying them dividends in more shares of Series B Preferred Stock so they can receive additional dividends on their dividends. If it wasn’t so irrational, it actually would be quite funny. While we don’t fully comprehend the Board dynamics of the three preferred holders, it appears Cerberus may be playing games and Liberty and Charter are allowing this to happen. Cerberus-appointed board members are the Chairman and the Chair of the Nominating and Governance Committee. They have a greater responsibility to effect change and enhance value, but all three preferred stockholders are simply flaunting their ownership and operating as Wall Street elitists by doing what is solely in their own interests. Instead of building a great company, you continue to show you are focused solely on yourselves. It is time for the Board, Cerberus, Liberty and Charter to change their ways and seek to create value for all stockholders.
2.Board compensation remains egregious and must be reduced further along with waiving of all board compensation otherwise due to directors who are employees of, or otherwise compensated by, the preferred stockholders.
While we acknowledge recent reductions in board compensation are a step in the right direction, they do not go far enough. We explained the basis for our argument why a 26 percent reduction in board compensation is not enough in our last public letter issued on March 6, 2023, using data from the 2022 proxy materials. Our analysis leads to the same conclusion based on SCOR’s own compensation disclosures. Here is the compensation paid to SCOR’s directors in 2022, as disclosed by SCOR:
NameFees Earned or Paid in Cash ($)Stock Awards ($) (1)Total ($)Nana Banerjee164,212204,000368,212Itzhak Fisher67,500204,000271,500Irwin Gotlieb28,247—28,247David Kline62,500204,000266,500Pierre Liduena85,000204,000289,000Kathi Love80,000204,000284,000Marty Patterson70,000204,000274,000
Brent Rosenthal212,500353,999566,499Brian Wendling65,000204,000269,000
While we appreciate the use of $2.50 per share versus the closing price on the date of grant of $2.04 per share when determining the number of RSUs issued to directors for 2022 compensation, the total value of the awards remains alarmingly high for a company of SCOR’s size; especially given the destruction in value of SCOR’s common stock under this current Board’s watch. If you are unwilling to reduce the value of your own compensation, at least align interests with stockholders through the issuance of options with substantially above-market strike prices. We do not have an issue with boards being compensated for their time and service. We take real issue with boards significantly overpaying themselves while common stockholders suffer from destruction in value that is the direct result of decisions or indecisions by such boards. Along these lines, SCOR’s Board has one of the worst track records we have encountered.
We also detailed our argument for why the preferred stockholders need to stop raiding SCOR’s balance sheet through the double-dipping of board fees and preferred dividends. Is the board compensation really material to the operations of Cerberus, Charter and Liberty/Qurate? Every dollar is important to building value at SCOR. We would rather see that compensation, however much it is, be used to hire great employees rather than padding the returns of investors who have destroyed so much value for common stockholders. Individual board members should be paid; but in this case, we believe such compensation should be borne solely by the preferred stockholders.
3.Brent Rosenthal must be removed as Lead Independent Director immediately.
After all these years, it is appalling SCOR’s Board has allowed Brent Rosenthal to remain as Lead Independent Director. His compensation for 2022, 2021 and 2020 was $566,499, 876,169, and 892,000, respectively. For what? Under Mr. Rosenthal’s watch, which goes back to 2008, starting with Rentrak, SCOR’s common stock is down 91.5%. If we calculate his return since he became a Director of SCOR in 2016 following the merger of Rentrak and SCOR, SCOR’s common stock price is down over 97.2%! It looks even worse when compared with the overall market as shown below:
DateRelevant RENT or SCOR Stock PriceValue @ April 14, 2023Performance through April 14, 2023Corresponding S&P 500 Performance w/ Dividends Reinvested$1000 Invested in RENT or SCOR on Respective Dates$1000 Invested in S&P 500Brent Rosenthal joins RENT Board8/21/08$14.63$1.24-91.5%331%$85$4,309Brent Rosenthal joins SCOR Board1/29/16$38.53$1.08-97.2%143%$28$2,426
Source: Bloomberg
And for that performance, the Board’s Compensation Committee paid Mr. Rosenthal $566,000 as a director last year. Either of us would be happy to submit our resumes for Lead Independent Director of SCOR if that is the compensation and performance expectation. In reality, either of us would work for nothing and believe we would have a good chance to beat his atrocious record of oversight and resulting stock performance!
It is obvious to us that Itzhak Fisher, as Chair of SCOR’s Nominating and Governance Committee, has no regard for stockholders or accountability. After all these years, continuing to reappoint Brent Rosenthal to be the Lead Independent Director speaks volumes for how out of touch and lost SCOR’s Board and Nominating and Governance Committee are in following proper governance and showing your employees you understand the concept of rewarding individuals for achieving performance objectives.
To summarize, we are appalled that the Nominating and Governance Committee thinks Mr. Rosenthal is the right person to represent all stakeholders of SCOR. You know who we want to represent our interests? Strategic leaders who understand governance and the purpose of being objective fiduciaries who can make decisions designed to enhance value for everyone and ones with successful track records of creating value. Brent Rosenthal? No, thank you! You have bastardized the importance of a Lead Independent Director, and the idea that he is our voice on the Board is insulting. The only thing that Mr. Rosenthal leads is his desire to pay himself vast sums of money regardless of his track record of destroying value for common stockholders. Of course, it's hard to remove him as Lead Independent Director when Mr. Fisher is the chair and Mr. Rosenthal is the only non-preferred stockholder representative on the Nominating and Governance Committee.
But there’s really nothing surprising about this situation whatsoever. Consider the fact that Messrs. Fisher and Rosenthal overlapped on SITO Mobile’s Board of Directors, where they jointly oversaw unthinkable value destruction ahead of the company’s October 2020, Chapter 11 bankruptcy filing. The only logical explanation as to why Mr. Rosenthal has been able to maintain his position on SCOR’s Board is because of prior relationships that protect him from the reality of the destruction in value he has caused at SCOR. In 2023, protecting failed directors because of past relationships is poor and unacceptable governance. It is not that difficult to ascertain what is going on at SCOR’s Board and why. Cerberus maintains significant power as its appointed Board Members are Chairman of the Board and Chair of the Nominating and Governance Committee. Representatives of the other preferred stockholders are also members of the Nominating and Governance Committee. These preferred stockholders wouldn’t appoint anyone that would disagree with their views. We believe they continue to support Mr. Rosenthal as a member of the Nominating and Governance Committee and the Board itself because he does what they want. It’s awful governance.
We will continue to hold the Nominating and Governance Committee to the highest standards and, to that end, demand the immediate removal of Brent Rosenthal as Lead Independent Director.
4.Appoint Jon Carpenter to SCOR's Board.
We are a broken record. We cannot understand why Jon Carpenter is not a member of SCOR’s Board. There are very few companies, let alone public companies, where the CEO is not a member of the company’s board. What is the Nominating and Governance Committee afraid of? Could it be that Jon might actually represent the interests of all stakeholders in SCOR? If you look at the composition of the Nominating and Governance Committee, that would be a reasonable conclusion. It is currently made up solely of representatives appointed by or affiliated with the preferred stockholders and Brent Rosenthal, who we believe is, for all intents and purposes, a proxy for the preferred stockholders. Given these facts, we can only conclude that the reason Mr. Carpenter is not on the Board is because he might actually represent the interests of all stockholders, including the common stockholders and the employees who hold common stock or options for the purchase of common stock.
There is only one way to prove us wrong; appoint Mr. Carpenter to SCOR’s Board.
We now know the reason SCOR’s Board chose to ignore us following our request to meet with the heads of its Compensation and Nomination and Governance Committees. Who wants to face the third-largest common shareholder when the governance of the company has limited accountability and the compensation paid to Board members is clearly egregious? So, we are left with this; another public airing of grievances, which doesn’t give us much satisfaction. The Board has not put forth a single proposal designed to enhance value for the employees of SCOR and the common stockholders. The Board simply exists to pat each other on the back and pay themselves compensation no matter how ineffective and incompetent they are in fulfilling their responsibility to create value. The preferred stockholders care solely about themselves and are working in conjunction with the board to put a collar around SCOR’s stock and potentially increase their return through the issuance of additional shares of Series B Preferred Stock to the detriment of common stockholders. We except more from Cerberus, Charter and Liberty/Qurate. We won't stop airing our thoughts publicly and holding SCOR’s Board accountable to all stakeholders of the company until you fix the issues we have been talking about for over two years.
SCOR’s Board has the ability to show they actually care about its fiduciary duty and its preferred stockholders have the ability to show they believe SCOR’s common stock is significantly undervalued. As always, we are willing to partake in productive dialogue with the Board on these topics, but we ultimately need action from SCOR’s Board, not empty words.
Best Regards,
/s/ Kevin M. Rendino
Chief Executive Officer
Daniel B. Wolfe
President
Source:
https://www.sec.gov/Archives/edgar/data/893739/000089373923000020/scor-13dxapr2023.htm