ISS Backs Two Dissident Nominees for AOL Board

 

NEW YORK ( TheStreet) -- Institutional Shareholder Services is recommending that AOL ( AOL) shareholders vote for two of the three board nominees backed by dissident investor Starboard Value LP, according to published media reports.

The shareholder advisory firm released its report Saturday on AOL's proxy battle, recommending that shareholders vote for Starboard CEO Jeffrey Smith and Dennis Miller, a strategic adviser to Lions Gate Entertainment Corp. (LGF).

But ISS didn't endorse James Warner, the principal of Third Floor Enterprises, a media and marketing advisory firm.

Starboard owns 5.3% of AOL and has publicly criticized the Internet company's current strategy of building up its Patch local news and information network.

In a presentation last month, Starboard described Patch as "structurally flawed," asserting that it has high costs and is not scalable.

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In its report released Saturday, ISS issued an opinion on Patch somewhere between the two sides in the proxy battle, according to The Wall Street Journal.

ISS was quoted saying, "Patch, as a growth initiative, might well deserve some additional patience."

But, according to the Journal, ISS also questioned AOL's pace of rolling out the network, writing "... as the dissident points out, numerous other firms have already tried and failed to create an effective business out of hyperlocal, strongly suggesting that getting the business model right is more important than blanketing the landscape."

In a news release Saturday, AOL said it was pleased that ISS didn't recommend that shareholders vote for all three Starboard nominees.

The company recommended that shareholders vote against Smith and Miller, asserting the two dissident nominees "would dismantle the strategy that is producing strong returns for shareholders."

The company added, "We believe Mr. Smith and Mr. Miller do not add any unique skills or experience the Board does not already have."

An ISS representative did not immediately return an email seeking a copy of the firm's report.

AOL plans to hold its annual shareholder meeting on June 14.

Shares of AOL closed Friday down 32 cents at $27.11.

This article was written by a staff member of TheStreet.

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