Pictured above, David Stetson
Activist investor group MG Capital, which owns 5.8 percent of Contura Energy Inc., is demanding the company replace half of its board of directors. In a letter dated Oct. 7, Michael Gorzynski, managing member of MG Capital, says, “After recently assessing all of our concerns pertaining to Contura’s trajectory, we concluded that the Company’s Board – in particular, legacy directors John Lushefski, Daniel Geiger and Albert Ferrara, Jr. – lacks the expertise and skills to support a turnaround in today’s new energy economy.”
Gorzynski credits CEO David Stetson and Contura’s leadership team with doing, “an exceptional job navigating this year’s difficult market environment.” However, he says, “We contend that Contura’s new management has inherited a Board that is ill-equipped and poorly-aligned. It looks as if none of the long-serving directors – other than Mr. Stetson – have the expertise needed to support management’s growth, modernization and efficiency plans.”
On Sept.1, 2018, COntura shares were trading at $79.25. At the close of business Oct. 15, 2020, the share price was $7.37.
Gorzynski points to the board’s decision to buy back shares of Contura stock at $31.54 a share as proof of judgment that is not only bad, but costly.
“Most disappointing, however, is the Board’s reaction to the COVID-19 crisis. It appears that Contura’s directors have maintained their significant Board compensation as the Company has had few options other than to shutter assets and furlough employees,” Gorzynski adds. “For context, in 2019, Mr. Lushefski was paid $293,000, Mr. Geiger was paid $216,000 and Mr. Ferrara was paid $266,000. We deem these to be outsized sums given that these legacy directors have overseen hundreds of millions of dollars in value destruction and presided over sobering job losses.”
On Oct. 13, Contura issued a press release in reply, stating, “Although we would have preferred that MG Capital engage with Contura privately, we have reviewed and considered the MG Capital letter. MG Capital, the Board, and the executive management team are closely aligned in their goals and strategic direction for the Company; however, we believe that a number of the underlying assertions in the letter are inaccurate and we wish to clarify some of them.
“With respect to Board and executive management compensation, the Board has in fact reacted to the COVID-19 pandemic,” the company said. “In May 2020, each member of the executive management team voluntarily took a 5% reduction in salary. In the same month, the Board’s compensation committee, which includes all of the ‘legacy directors,’ as defined in the MG Capital letter, unanimously determined that all of the Company’s non-employee directors should join the Company’s executive management in this effort by accepting a 5% reduction in their annual retainers. We have been advised by our compensation consultants that our Board compensation is well within the norms of our peers.”