Proxy Battle Brews: Why Harley-Davidson's Governance Struggle Matters to Investors

The iconic roar of a Harley-Davidson motorcycle has long symbolized freedom and rebellion. But today, a quieter yet equally significant battle is unfolding in corporate boardrooms. Two of the world’s leading proxy advisory firms—Glass Lewis and Egan-Jones—have urged Harley-Davidson shareholders to vote “WITHHOLD” against three entrenched directors, accusing them of governance failures that have driven the company’s stock into a prolonged slump. This clash highlights a broader truth: in an era of activist investor pressure, poor performance and stagnant leadership can no longer go unchallenged.

The Case for “WITHHOLD”: A Decade of Underperformance

Glass Lewis and Egan-Jones have zeroed in on three directors for shareholder rejection: CEO/Chairman Jochen Zeitz (18-year tenure), Presiding Director Thomas Linebarger (17 years), and Sara Levinson (29 years). Their shared indictment? A “decade of value destruction” that has left Harley’s stock languishing.

Consider the numbers:
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- The company’s market capitalization has dwindled to $2.3 billion, down from $7.5 billion in 2015, while peers like Polaris (PII) have surged.

The advisory firms argue that Harley’s “Hardwire” turnaround plan—launched in 2020 to cut costs and boost margins—has failed to deliver. Glass Lewis notes that the company missed 2023 EBITDA targets by $160 million and underperformed peers by 28% in 2024. Egan-Jones adds that CEO Zeitz’s compensation (totaling $12.8 million in 2023) bore no correlation to shareholder returns, which have declined 68% since 2016.

The Governance Gaps: Tenure, Strategy, and Accountability

The advisory firms highlight three critical failures:
1. CEO Succession Uncertainty: With Zeitz, 68, planning to step down, the board has yet to name a successor. Glass Lewis questions whether directors with decades of tenure—Linebarger has served since 2008—possess the agility to select a leader capable of modernizing Harley’s aging product line and digital strategies.
2. Blame Shifting: Egan-Jones accuses the board of deflecting accountability, citing its habit of attributing poor results to “external factors” like trade wars or supply chain disruptions. “This is a failure of fiduciary duty,” the firm states, noting that all three targeted directors have served through periods of sustained underperformance.
3. Pay-Performance Disconnect: Shareholders are asked to vote “WITHHOLD” via the Blue proxy card to protest compensation packages that reward stagnation. Egan-Jones calculates that since 2010, the board oversaw a 71% decline in shareholder value while approving 23% annual pay hikes for top executives.

ISS’s Contrarian Stance: A Vote of Confidence in the Status Quo

Institutional Shareholder Services (ISS) has bucked the trend, recommending a “FOR ALL” vote. Its defense hinges on two points:
- Strategic Progress: ISS acknowledges Harley’s stabilization under Zeitz, citing a 14% EBITDA margin improvement in 2024 and a 20% reduction in fixed costs.
- CEO Search Risks: ISS warns that ousting the three directors could disrupt the board’s ongoing CEO search. It criticizes activist investor H Partners—a 9.3%-stakeholder—for abandoning the board after their preferred candidate was not selected, calling their “vote no” campaign “arbitrary.”

The Activist Playbook: H Partners’ High-Stakes Gamble

H Partners, Harley’s largest shareholder, is leading this revolt. Their argument is stark:
- The board’s prolonged tenure (average 18 years) has bred complacency.
- A new director slate—featuring tech and automotive veterans—would bring fresh perspectives on digital transformation and global competition.

But H Partners faces an uphill battle. To win, they must secure votes on the Blue proxy card (which requires explicit “WITHHOLD” votes) over the White card (company-endorsed “FOR ALL”). Shareholders holding proxy cards dated after April 1, 2025, will override earlier votes, adding complexity.

What’s at Stake for Investors?

Harley-Davidson’s future hinges on resolving its governance crisis. The company’s core challenges are well-documented:
- Declining U.S. sales of its iconic cruisers (-12% since 2019).
- Struggles in high-growth markets like Europe and Asia.
- A reliance on debt-heavy buybacks to prop up stock prices.

A “WITHHOLD” victory could force a board refresh, potentially accelerating the CEO succession process and prioritizing investor returns over legacy priorities. Conversely, a “FOR ALL” outcome risks prolonging the status quo—a path that has already cost shareholders $5.2 billion in market value over the past decade.

Conclusion: Governance Reform or More of the Same?

The May 14, 2025 shareholder meeting will decide whether Harley-Davidson’s leadership will be held accountable for its failures. The stakes are clear:
- Stock Performance: HOG’s 5-year underperformance (-68% vs. a 126% rise in the S&P 500) underscores the cost of stagnation.
- Competitive Risks: Rivals like Triumph (TRIPOL) and electric motorcycle startups are gaining ground, while Harley’s electric LiveWire division remains a niche product.
- Activist Momentum: H Partners’ campaign reflects a broader trend—investors are no longer tolerating underperforming boards.

For investors, the choice is between doubling down on a management team with a proven record of underachievement or backing a governance shakeup that could reset Harley’s trajectory. The vote is not just about three directors—it’s about whether the company can reinvent itself before its legendary brand fades into nostalgia.

As shareholders cast their ballots, one question looms: Can Harley’s board put the Hardwire plan into action—or will the real turning point be a hard vote for change?