Driver Management Comments on Flawed ISS Report Essentially Endorsing First United’s Assault on Corporate Democracy and Shareholders’ Rights

May 28, 2020 11:30 am
NEW YORK -- 

Driver Management Company LLC (together with its affiliates, “Driver” or “we”), the manager of an investment partnership that holds more than 5% of the outstanding shares of First United Corporation (“First United” or the “Company”) (NASDAQ: FUNC), today issued a statement in response to a report issued by Institutional Shareholder Services (“ISS”) in connection with the Company’s 2020 Annual Meeting of Shareholders (the “2020 Annual Meeting”) on June 11.

In its report, ISS acknowledges1:

  • “This contest has highlighted a subpar governance regime underscored by a refreshment process that has moved too slowly [...] The board has taken a relatively lethargic approach to refreshment, which has resulted in a long-tenured board with several relationships which, collectively, raise concerns regarding potential nepotism, if not outright conflicts.”
  • “[Regarding the Company’s] efforts to initiate the MD Commissioner investigation into the dissident [...] shareholders may see this action as an underhanded attempt to disenfranchise another shareholder from exercising its right to vote and nominate directors for election. Given the company's long-tenured board and slow refreshment process, shareholders may see this defensive tactic as further indication that the board is resistant to change.”
  • “These factors, along with the company's apparent attempts to disenfranchise the dissident from voting, suggest that shareholders would be well served by signaling their expectation that the board oversee more rapid improvements in the company's governance.”

Abbott Cooper, Driver’s founder and managing member, commented:

"ISS’ report—which is riddled with false equivalencies and facile analyses—calls into question its commitment to advancing and encouraging sound corporate governance. It is incomprehensible that ISS would encourage shareholders to ‘signal their expectation that the board oversee more rapid improvements in the company's governance’ while failing to recommend they vote for our highly-qualified nominees with significant banking and financial sector experience. Does ISS fail to understand that a vote for our nominees would have been the clearest possible step towards the ‘rapid improvements in the company’s governance’ urgently needed? Obviously, ISS has not done due diligence here, given the incontrovertible evidence that shareholders who ‘signal expectations’ contrary to the incumbent Board’s views are then reported by First United to state regulators for investigation and possible disenfranchisement. Perhaps if ISS had closely evaluated the damning revelations in the information produced by the Maryland Commissioner of Financial Regulation on May 15—information that demonstrates First United knowingly misled ISS regarding their role in instigating the regulator’s investigation into Driver’s purchase of First United’s shares for the purpose of disenfranchising us—ISS would have made a more thoroughly informed recommendation. Similarly, it is hard to understand how ISS can both be concerned about nepotism at First United and recommend its clients vote for Brian Boal, the undeniable beneficiary of the very nepotism that concerns ISS. ISS would certainly better serve its clients by adhering to some standards of logical consistency.

By recommending for any member of First United’s current Board, ISS is endorsing conduct that is wholly and fundamentally antithetical to basic concepts of shareholder rights. As such, it is hard to see how ISS can claim any credibility or authority in pushing other companies for modest, incremental improvements in corporate governance practices well within current norms when it fails to vigorously condemn First United’s willful assault on shareholders’ fundamental rights to vote and elect directors of their choosing.

The reality is that shareholders have two distinct choices at this year’s Annual Meeting of Shareholders on June 11: either place more trust in the hands of the legacy directors who want to harm and disenfranchise shareholders seeking to protect their investment OR vote to install three highly-qualified individuals with additive experience in the boardroom to ensure that shareholders' interests are finally prioritized. We encourage engaged shareholders interested in enhanced value to vote on the WHITE Proxy Card.”

As a reminder, First United’s assault on its largest active shareholder’s rights is still ongoing, as the Company has decided to maintain its abusive lawsuit against Driver even after the Maryland Commissioner of Financial Regulation’s investigation closed without any law being violated. Given that this baseless lawsuit will not be decided until after this year’s Annual Meeting of Shareholders, Driver has requested that First United immediately confirm whether it intends to deny our voting rights and refuse to recognize the validity of our nominees without any legal authority or justification.

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Shareholders can visit www.RenovateMyBank.com to learn about our highly-qualified nominees, the case for urgent change at First United, and how to vote on the WHITE Proxy Card TODAY.

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About Driver Management

Driver employs a valued-oriented, event-driven investment strategy that focuses exclusively on equities in the U.S. banking sector. The firm’s leadership has decades of experience advising and engaging with bank management teams and boards of directors on strategies for enhancing shareholder value.

1 Permission to use quotations neither sought nor obtained. Emphasis added.

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