"Nominee NELSON serves as CEO of KKR Capstone, which, along with KKR, received approximately $1.3 million from the Company for portfolio consulting services in the fiscal year 2011. We question the need for the Company to engage in consulting relationships with its directors. We view such relationships as potentially creating conflicts for directors, as they may be forced to weigh their own interests in relation to shareholder interests when making board decisions. In addition, a company's decision regarding where to turn for the best portfolio consulting services may be compromised when doing business with the firm of one of the company's directors."H Partners made the decision to withhold its votes for incumbent directors only after careful consideration of Sealy's performance, strategy and corporate governance structure. Since Sealy's IPO in 2006, KKR-dominated boards have overseen the destruction of $1.2 billion, or almost 90 percent, of common equity value. H Partners believes that Sealy's Board has:
- overloaded Sealy with debt and taken a short-term approach;
- made numerous strategic errors resulting in an approximate 50 percent decline in earnings;
- repeatedly made questionable CEO selections;
- allowed Dean Nelson, CEO of KKR's in-house consulting firm and a Sealy Director, to exert excessive operational influence with no accountability for his poor performance; and
- paid at least $20.9 million to KKR since Sealy's IPO in 2006(3), which represents a transfer of value from Sealy stockholders to KKR and its affiliates.