Eileen Drake beforehand owned two cellphones — one for work and one for private use — however the former US Army pilot was lately pressured to buy a 3rd machine to wage an uncommon boardroom battle.
The longtime chief government of Aerojet Rocketdyne, Drake is utilizing her new telephone to influence shareholders to maintain her in place, forward of a vote in late June.
Incumbent bosses normally function on the official firm slate of nominees for a board election and their administrative bills are paid by the corporate. No one objects after they use the trimmings of their workplace, together with work-issued cellphones, to foyer shareholders.
However, in probably the most uncommon company battles in latest reminiscence, there will probably be no Aerojet slate at a June 30 assembly as two rival factions, every with 4 members of the eight-person board, sq. off for management of the corporate.
The unusual state of affairs stems from a dispute between Aerojet’s chief government and its government chair, over a failed sale of the corporate to Lockheed Martin. The acrimonious spat has even seen Drake allege that her adversary provided her costly purses as an inducement to change the phrases of the deal.
Drake continues to be operating operations at Aerojet, the final US impartial maker of missile propulsion techniques. Yet she should chorus from utilizing firm assets within the election marketing campaign, based on a Delaware courtroom order from February.
“It’s tough. It’s not how I’m used to doing business. You know, I mentioned being the CEO is a pretty busy job,” she lately testified in courtroom. “Any time I talk to a shareholder, I start the conversation with, ‘I’m talking to you now as Eileen Drake, a shareholder, and not Eileen Drake, the CEO of Aerojet Rocketdyne’,” including that she had been cautious to filter her investor lobbying via her new, third telephone together with a definite Gmail account.
Drake’s adversary within the board election is Aerojet’s government chair, Warren Lichtenstein, who via his listed holding firm, Steel Partners, owns 5 per cent of the corporate. Drake has insisted that her group is the plucky underdog that lacks the deep pockets of its tycoon opponent.
Lichtenstein, nonetheless, has sued Drake, accusing her of violating the courtroom’s neutrality order and quietly utilizing the benefits of her workplace to wage her proxy combat. A Delaware ruling is due this week and the findings within the resolution could sway Aerojet shareholders for one or the opposite.
Lichtenstein, who has already discovered a substitute for Drake ought to he triumph, was as soon as her largest fan. In 2015 he tapped Drake, previously an government at Ford Motor and United Technologies, for a job at Steel Partners. Within months, he moved her to Aerojet the place Steel had been an investor since 2000 and Lichtenstein had been government chair since 2016. The firm manufactures rockets that energy the projectiles that fly into the ambiance or house together with numerous missiles in addition to satellites and different spacecraft and it counts the Pentagon and Nasa as key prospects.
In 2019, Lichtenstein mentioned that Drake “led the transformation of Aerojet Rocketdyne as CEO and as a member of the board, building a culture of continuous improvement and operational excellence”.
Both have mentioned in latest courtroom testimony that their as soon as productive working relationship unravelled over the corporate’s tried $4.4bn sale to Lockheed Martin. Announced in December of 2020, the deal collapsed earlier this 12 months after US regulators sued to dam it and stop Lockheed from vertically integrating missile manufacturing.
Drake wrote in courtroom filings that Lichtenstein “pushed to abandon discussions with Lockheed and advocated for a financial re-engineering strategy — a strategy to boost temporarily the company’s stock price, while dissipating cash” adopted by threatening her job.
She testified that because the Lockheed discussions progressed, Lichtenstein pressed her to push for an all-stock transaction slightly than a money buyout, even promising that he would purchase her a Birkin purse, a luxurious accent from Hermes whose price ticket can exceed $100,000. “And I kind of chuckled it off, but it was a bit inappropriate,” she mentioned in courtroom. Lichtenstein testified he had certainly provided Drake costly purses however as a correct incentive to safe a better deal worth.
Lichtenstein in the end joined the board in unanimously approving the all-cash phrases of the acquisition. But Drake’s grievances would solely compound throughout 2021. She wrote three separate memos to the board via the course of the 12 months expressing issues that Lichtenstein in interactions with different defence firm executives was undermining Drake whereas sharing his scepticism that the Lockheed buyout of Aerojet would shut.
Drake would go on to accuse Lichtenstein of different objectionable behaviour together with bullying the corporate’s funding bankers and inundating Aerojet’s administration with knowledge requests. She additionally later shared that she stopped assembly with Lichtenstein in particular person as he usually insisted that they meet at a restaurant or at his seaside house in southern California on weekends.
“I had absolutely no problem, and I don’t today, if Mr Lichtenstein wants to have a professional meeting in the office, in one of our locations, but I did not at this time, with everything that was going on, want to meet with him in his house, which I typically had to sit on the couch with him.”
Lichtenstein in his testimony mentioned he usually performed conferences at his properties. He has accused Drake of threatening to resign in 2021 if he didn’t co-operate together with her technique, including that Drake was not match to be CEO since she had not ready for the potential termination of the Lockheed deal.
The simmering battle between the CEO and government chair boiled over publicly early this 12 months. On January 25, the US Federal Trade Commission introduced it will sue to dam the closing of the Lockheed transaction. Around then, Lichtenstein proposed to his fellow administrators that the prevailing board ought to shrink from eight to seven after one director indicated he deliberate to retire after the upcoming May annual assembly. Drake and her allies had been suspicious. Lichtenstein would management 4 votes, permitting him to jettison the CEO whilst an organization investigation into his conduct remained ongoing.
Attempts at compromise between the 2 factions failed and on February 1, Lichtenstein launched his marketing campaign for a full slate of seven administrators — his 4 present loyalists and three newcomers. And in what would turn out to be the flashpoint for the authorized dispute between Drake and Lichtenstein, afterward February 1, Aerojet distributed an official firm press launch that mentioned Aerojet was “disappointed” by Lichtenstein’s gambit whereas it additionally disclosed publicly for the primary time that his 2021 conduct was dealing with board investigation.
Lichenstein rapidly sought a brief restraining order from a Delaware courtroom arguing that Drake and the corporate couldn’t converse on behalf of Aerojet towards him with out board authorisation.
Later in February, the Delaware Court of Chancery granted the restraining order, writing in its opinion that “[w]hile the board remains split on the question of who should serve on the company’s slate of director nominees, the company must continue to stand neutral”.
Drake has argued in her courtroom papers that the corporate’s administration was at liberty to behave towards the menace that they are saying Lichtenstein posed to grab management of the corporate. Still, Drake has additionally maintained that she has abided by the restraining order and denies Lichtenstein’s accusations that she had relied upon firm staff and assets to battle her challenger.
“It is the board’s decision to nominate a slate and if it doesn’t, I’m not sure that there can be an official company slate,” mentioned Jill Fisch, a company governance scholar on the University of Pennsylvania Law School. “Day-to-day operating decisions even with respect to SEC filings and shareholder communications are typically delegated to management. However, the board is still the ultimate authority on director elections.”
The upcoming June 30 shareholder assembly was solely scheduled as a result of Drake requested and obtained consents from greater than 25 per cent of shareholders because the paralysed board itself didn’t set a date.
In May, Aerojet launched the outcomes of the investigation of Lichtenstein, deciding it will formally reprimand him for inappropriately “expressing scepticism concerning the likelihood of the merger being approved, and approach[ing] two parties to inquire regarding their interest in becoming CEO if the merger did not close and criticising Ms Drake’s performance”. Lichtenstein was, nonetheless, cleared of “harassment” and “retaliation” associated to his quite a few data requests to Aerojet administration.
Despite the bitterness of the dispute, there’s a likelihood that Drake and Lichtenstein settle the proxy combat earlier than the late June vote. An individual near Lichtenstein maintained that Drake had been keen to go away Aerojet for a package deal of virtually $50mn. Drake, in a press release, referred to as that determine “false” and mentioned that “the members of her slate are committed to continue the fight for the election of a board not controlled by Steel Partners”.
Drake had as soon as estimated that the proxy combat may value her group $10mn in bills. However, in a latest securities submitting, she wrote her bills would solely complete $750,000, partly as a result of Aerojet’s firm authorized and monetary advisers give up these roles to hitch her staff both with out cost or on a contingency foundation. Should the referendum occur and Drake prevail, the brand new board may then determine to reimburse all of her bills — together with these for her newest telephone.