Matthews' Governance Changes: A Crucial Step Towards Shareholder Value

As the vote on the boardroom fight at Matthews International Corporation (MATW) looms, the company has announced significant governance changes aimed at enhancing long-term shareholder value. These changes, which include declassifying the Board, adopting a majority voting standard, and eliminating supermajority voting requirements, are a crucial step in the right direction. But why are these changes so important, and what impact could they have on Matthews' stock price and long-term shareholder value?



First, let's address the elephant in the room: the boardroom fight. Proxy advisory firms ISS, Glass Lewis, and Egan-Jones have all recommended that Matthews' shareholders vote in favor of Barington Capital's director nominees. This unanimous support suggests that the current board may not be effectively overseeing management and driving long-term shareholder value. If shareholders heed these recommendations, it could signal a lack of confidence in the current board, potentially leading to a decline in the stock price.

Now, let's dive into the proposed governance changes and their potential impact on Matthews' long-term growth and value creation.

1. Board Declassification: Matthews plans to declassify its Board over a three-year period, allowing for the annual election of directors. This change is a best practice in corporate governance, as it promotes accountability and responsiveness to shareholder concerns. A classified board can lead to entrenchment and lack of responsiveness to shareholder interests (Glass Lewis, 2021). By declassifying the Board, Matthews is better positioned to create long-term shareholder value and maintain the confidence of its investors.
2. Majority Voting Standard: Matthews will change its voting standard in uncontested elections to a majority voting standard for director elections. This shift is a best practice as it ensures that directors are elected with the support of a majority of shareholders. A majority voting standard enhances accountability and aligns director interests more closely with those of shareholders (ISS, 2021). By adopting this standard, Matthews is demonstrating its commitment to transparency and accountability, which can lead to improved shareholder value.
3. Eliminating Supermajority Voting Requirements: Matthews will eliminate supermajority voting requirements for certain amendments to its Articles. This change is a best practice as it reduces the barriers to making necessary changes to the company's governance structure, promoting flexibility and adaptability (Egan-Jones, 2021). By eliminating these requirements, Matthews is better equipped to adapt to changing market conditions and make strategic decisions that drive long-term shareholder value.