Barnwell Industries Claims Open to Resolution - All Talk, No Action

The corporate governance battle between Barnwell Industries and activist investor Ned Sherwood has reached a critical juncture, with both sides framing the conflict as avoidable—yet the evidence suggests little progress toward resolution. Barnwell’s insistence that it is “open to constructive, good-faith discussions” has been met with skepticism, as Sherwood accuses the company of wasting shareholder funds on legal defenses while failing to deliver operational improvements. The stakes are high: the outcome of their proxy contest on May 29 will determine whether Barnwell’s leadership retains control or cedes it to a slate of Sherwood’s nominees.

The Conflict in Context

Sherwood, who holds 29.9% of Barnwell’s shares, seeks to replace five incumbent directors with his own nominees, arguing that the current board has mismanaged the company. His criticism centers on Barnwell’s alleged squandering of $6 million—nearly 50% of its $12 million market capitalization—on legal and defensive measures, such as poison pills and bylaw changes. Sherwood claims these actions reflect a leadership “entrenched in self-preservation” rather than focused on shareholder value.

Barnwell, in turn, has framed its efforts as necessary to counter Sherwood’s “self-serving” campaign, which it calls a bid to seize control without offering a premium. The company highlighted support from Glass Lewis, a prominent proxy advisory firm, which recently recommended against removing three of Barnwell’s directors, citing their “highly qualified” credentials and proven track record. This endorsement is a significant boost, as proxy advisors like Glass Lewis heavily influence institutional investors’ voting behavior.

The Settlement Offer and Rejection

In an apparent gesture of compromise, Barnwell proposed a settlement in which five of seven board seats would go to Sherwood’s nominees, with Sherwood himself becoming chairman. However, Sherwood rejected this offer, demanding full control rather than a shared governance arrangement. This refusal underscores a fundamental impasse: Barnwell seeks to mitigate conflict through incremental change, while Sherwood insists on a clean sweep of the board.

Barnwell’s actions beyond public statements include a non-binding letter of intent to sell its water well subsidiary—a move to streamline operations and focus on core oil and gas exploration. While this aligns with its stated strategy to improve efficiency, critics argue that such moves are insufficient to address the root of shareholder discontent.

The Cost of Conflict

The $6 million spent on legal fees—a staggering 50% of Barnwell’s market cap—raises serious questions about whether shareholder capital is being deployed wisely. Sherwood’s argument that this spending reflects poor governance gains credibility when juxtaposed with Barnwell’s lackluster stock performance: its shares have fallen 18% over the past year, outperforming only 20% of peers in the energy sector.

Shareholder Sentiment and Glass Lewis’ Role

Glass Lewis’s rejection of Sherwood’s campaign—a decision amplified by its analysis of Barnwell’s operational improvements, including cost reductions and leadership transitions—has tilted momentum toward the incumbent board. The advisory firm dismissed Sherwood’s proposals as “vague and reckless,” particularly his reliance on leveraging tax losses for unspecified acquisitions. This assessment is a blow to Sherwood’s credibility, as institutional investors often follow proxy advisory recommendations.

Yet, shareholders remain divided. While Barnwell has demonstrated strategic shifts—such as divesting non-core assets—the lack of a clear, detailed plan from Sherwood to improve performance leaves investors in a bind. Barnwell’s argument that shareholders should reject “opportunistic” moves gains traction when paired with Glass Lewis’s validation, but the company’s willingness to spend half its value on legal fees undermines its claims of fiscal responsibility.

Conclusion: A Test of Credibility

Barnwell’s narrative of openness to resolution hinges on its actions, not just its words. While the Glass Lewis endorsement and proposed settlement suggest a desire to avoid conflict, the board’s failure to secure Sherwood’s buy-in—and its continued expenditure on defensive measures—paint a picture of a leadership team more interested in preservation than transformation.

For shareholders, the May 29 vote is a stark choice: support Barnwell’s proven, albeit stagnant, governance—or risk a takeover by an activist with no clear path forward. The $6 million spent on legal fees alone should give pause. If Barnwell truly seeks resolution, it must demonstrate flexibility beyond half-measures. Until then, the battle remains a proxy for deeper questions about whether either side truly acts in the best interest of long-term value creation.

In the end, Barnwell’s claims of being “open to resolution” may ring hollow if its actions continue to prioritize entrenchment over meaningful compromise—a lesson not just for this proxy war, but for corporate governance at large.