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Lifeway Foods: A Boardroom Battle Over Governance and Value

Philip CarterFriday, May 2, 2025 3:37 pm ET

32min read

Edward Smolyansky’s sharp critique of Lifeway Foods’ (NASDAQ: LWAY) amended 2024 10-K filing has ignited a high-stakes governance clash, exposing tensions over leadership, compensation, and shareholder rights. At the heart of Smolyansky’s objections are allegations of mismanagement, excessive executive pay, and a Board that prioritizes insiders over investors. For shareholders, the fallout could redefine Lifeway’s trajectory—or spell prolonged instability.

The Governance Crisis: Delayed Meetings and Hostile Tactics

Smolyansky’s most immediate complaint centers on Lifeway’s refusal to set a date for its 2025 Annual Meeting, despite his timely submission of a full slate of director nominees. By delaying beyond the June 2, 2025, deadline, the Board risks violating its own bylaws—a move Smolyansky calls “a calculated act of hostility.” This stalling tactic, he argues, reflects a broader pattern of governance failures, including the elimination of Lifeway’s internal legal team in 2020 and the reliance on external counsel for critical decisions.

The consequences for shareholders are stark: delayed accountability, wasted resources, and a Board insulated from scrutiny. Smolyansky’s proxy campaign, which seeks to replace the entire Board, now hinges on whether Lifeway will comply with its legal obligations.

The Rejected Danone Deal: A Premium Lost?

Smolyansky’s criticism of Lifeway’s rejection of Danone’s acquisition offer is equally incendiary. The French food giant reportedly bid at a “significant premium” to Lifeway’s then-share price, yet the Board declined without public explanation. Smolyansky alleges this decision prioritized insiders over shareholders, particularly given the subsequent “excessive” compensation awarded to CEO Julie Smolyansky.

In December 2024, Julie Smolyansky received a $2 million retention bonus and a $6.5 million equity grant—despite Lifeway’s 20.6% earnings decline that year. Her change-in-control severance was also quietly raised from 2x to 3x base salary. These moves, Smolyansky argues, reflect a Board that rewards executives at shareholders’ expense.

Legal Warfare and Wasted Capital

Lifeway’s legal strategy has been equally contentious. The company has spent over $1 million suing Edward and Ludmila Smolyansky, as well as their new venture Pure Culture Organics™, over alleged trademark and trade secret violations. Yet a federal lawsuit against the Smolyanskys was dismissed with prejudice in 2024, barring Lifeway from re-litigating the claim.

Smolyansky calls these actions a “waste of shareholder funds” and evidence of a Board blinded by family feuds. With every lawsuit dismissed or abandoned, the financial toll mounts—and investors bear the cost.

Governance Failures: The Quiet Erosion of Oversight

The elimination of Lifeway’s internal legal team in 2020 has left a governance vacuum. Julie Smolyansky’s husband, Jason Burdeen—a non-lawyer—now oversees legal and strategic decisions, earning a 30% pay raise in 2024. This concentration of power, Smolyansky asserts, violates Lifeway’s own policies and exposes shareholders to avoidable risks.

The Bottom Line: A Crossroads for Lifeway

Smolyansky’s critique paints Lifeway as a company in crisis: financially strained, legally embattled, and governed by a Board that seems more focused on personal conflicts than shareholder value. Key questions remain:

Will Lifeway’s Annual Meeting proceed on time? A missed deadline could trigger legal repercussions and further erode investor confidence.
What value did the Board see in rejecting Danone’s offer? With no public justification, shareholders deserve transparency.
Can the Smolyanskys’ proxy campaign succeed? Their slate includes seasoned executives like former CEO Greg Steltenpohl, but Lifeway’s entrenched leadership has shown little willingness to compromise.

For investors, the stakes are clear. Lifeway’s stock has underperformed the S&P 500 by over 40% since 2020, while its legal expenses now account for nearly 10% of net income—a stark contrast to peers.

Conclusion: A Governance Test for Shareholders

Edward Smolyansky’s rebuke is not just about corporate governance—it’s a battle for Lifeway’s future. With excessive executive pay, wasted legal costs, and a Board that appears disconnected from shareholder interests, the company faces a credibility crisis.

The data tells a damning story:
- Julie Smolyansky’s 2024 compensation package totaled $8.5 million, despite a 20.6% drop in earnings.
- Over $1 million in legal fees have been spent on failed lawsuits, with no tangible return.
- Lifeway’s stock has underperformed its sector by 37% since 2020.

Shareholders must decide: Is Lifeway worth saving under its current leadership, or is a leadership overhaul—a Smolyansky victory—the only path to value creation? The 2025 Annual Meeting will be the arena where this question is finally answered.

For now, Lifeway’s journey serves as a cautionary tale: when governance fails and conflicts fester, even iconic brands risk becoming casualties of their own boardroom wars.

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