Harley-Davidson's Governance Battle: A Secret Deal or Strategic Defense?

The rivalry between Harley-Davidson and activist investor H Partners has erupted into a full-blown governance showdown ahead of the company’s 2025 annual meeting. At the heart of the dispute are allegations that Harley’s board made secret, undisclosed commitments to select shareholders to secure votes—a move H Partners claims violates corporate governance norms. Meanwhile, Harley’s leadership defends its transparency and strategic success, framing the conflict as a battle over the company’s future. Let’s dive into the details of this high-stakes proxy war and its implications for investors.

The Allegations: Secrecy and Self-Interest?

H Partners, a 9.3% shareholder, accuses Harley’s board of orchestrating a “two-tiered shareholder system” by secretly promising select investors that three long-serving directors—CEO Jochen Zeitz, Presiding Director Tom Linebarger, and 29-year board member Sara Levinson—would resign within a year. The firm further claims the board assured these favored shareholders that an external CEO would replace Zeitz, while abandoning his transition to Executive Chair. H Partners argues these commitments, never disclosed publicly, violate SEC proxy rules and reflect governance failures tied to Harley’s declining brand equity, dealer unrest, and $9 billion in shareholder value erosion since 2015.

The activist firm questions why these directors would fight a proxy battle if they planned to resign, calling it a “smokescreen” to retain power. H Partners has mobilized independent proxy advisors Glass Lewis and Egan-Jones, which recommend shareholders withhold votes for Zeitz, Linebarger, and Levinson via a “BLUE proxy card.”

Harley’s Defense: Success Under Fire

Harley counters that H Partners’ claims are “disingenuous and harmful,” emphasizing its Hardwire strategic plan’s success. The company cites robust financial metrics: 13% operating margins (4% above peers), free cash flow at 70% of EBITDA (twice the industry median), and a 10% TSR advantage under Zeitz. Harley also defends its CEO search process, initiated in September 2024 after Zeitz announced his retirement plans. The board enlisted an executive search firm and a committee including Jared Dourdeville—a former H Partners director who resigned abruptly after his preferred candidate was rejected for lacking qualifications.

Harley accuses H Partners of hypocrisy, noting Dourdeville supported Zeitz and the Hardwire strategy during his three-year tenure, voting for all director re-elections until his resignation days after his candidate’s rejection. The company also accuses H Partners of leaking confidential candidate details and using flawed peer benchmarks (e.g., comparing Harley to Polaris and BRP, which lack Harley’s brand and scale).

The Data Behind the Debate

• Financial Performance: Harley’s stock has risen 32% since Zeitz’s 2021 appointment, outperforming Polaris (up 18%) and BRP (down 5%). Its market cap stands at $8.3 billion, up from $6.9 billion in early 2021.
• Shareholder Returns: Harley has returned $1.4 billion to shareholders via buybacks and dividends since 2022, reducing its share count by 25%.
• Governance Metrics: The board has refreshed its membership, with one-third of directors added in the past four years. Annual anonymous evaluations ensure accountability.

The Proxy Battle’s Stakes

The May 14 shareholder vote will decide whether Zeitz, Linebarger, and Levinson remain on the board. H Partners’ “BLUE proxy” seeks to oust them, while Harley’s “WHITE proxy” urges support. A win for H Partners could upend Harley’s leadership transition, potentially destabilizing its Hardwire strategy. Conversely, Harley’s defense hinges on proving its governance integrity and operational success outweigh governance concerns.

Conclusion: A Governance Crossroads for Harley

This clash is more than a proxy battle—it’s a referendum on Harley’s leadership and strategic direction. H Partners raises valid governance concerns, particularly the selective disclosure of director exit plans, which could undermine shareholder trust. However, Harley’s financial performance—driven by strong margins, cash flow, and market outperformance—provides a counterweight to these allegations.

Investors must weigh two narratives: one of opaque governance risking further value destruction, and another of a proven strategy delivering tangible results. While the $9 billion equity loss cited by H Partners is alarming, Harley’s rebound since 2021 suggests a path to recovery under current leadership. The proxy vote’s outcome could swing based on which narrative resonates more with shareholders. For now, Harley’s stock performance and peer comparisons suggest the market is leaning toward supporting the status quo—but the board’s transparency and accountability will remain under scrutiny regardless of the vote’s result.