Crown Crafts, Wynnefield Tussle

Wage Proxy Fight by Proxy

James Mammarella, August 7, 2007

In the latest give-and-take of the weeks-long wrestling match between infant and juvenile products manufacturer Crown Crafts Inc. and 14.6% shareholder Wynnefield Group, each party rolled out its own proxy pals as proof of broader support for its side.

Wynnefield on Aug. 2 said that the corporate proxy advisor firms Institutional Shareholder Services Inc. (ISS) and Proxy Governance Inc. (PGI) both advised that Crown Crafts shareholders should vote for the Wynnefield "Gold" proxy card with its slate of candidates for the Crown Crafts board of directors.

Wynnefield quoted ISS as saying in part, "We believe the inclusion of one dissident nominee at the board would add value to deliberations on strategic alternatives, while not being disruptive to the board functioning." Wynnefield has proposed two directors; ISS said it supports the election of one of them, Frederick Wasserman.

Wynnefield also quoted PGI, to wit: "We believe that Wynnefield's nominees will bring diversity and fresh thinking to the board and, as such, we support their election."

The same day, Crown Crafts sent its own letter to stockholders, which noted that proxy research and advisory firm Glass, Lewis & Co. recommended that they vote for the Crown Crafts slate of directors, as listed on the "White" proxy card.

In the letter, Crown Crafts quotes Glass, Lewis & Co. as noting: "Overall, we find the Dissident's plan for improvement to be lacking. While the Dissident states its intention to improve corporate governance practices and deliver 'improved financial results,' the Dissident fails to disclose substantive details describing how it plans to improve such results."

In addition, Crown Crafts quoted from the ISS memo, noting that ISS credited the current Crown Crafts management with managing "a successful turnaround," pointing out that "gross margin has increased from 22.6 to 25.1% and its operating margin from 7.3 to 10.9% from FY2003 through FY2007." ISS also stated that "management should be given credit for the company's financial restructuring and streamlining operations."

Earlier in the week, the two combatants had traded proposals and counterproposals concerning Wynnefield's urging of an expanded board, a new nominating and governance committee, and an altered compensation plan for non-employee directors. The underlying issue of all the separate suggestions is who will control the company going forward — the current Crown Crafts management that has steered the manufacturer through a stressful but apparently fruitful turnaround, or a set of directors with several fresh faces from Wynnefield, which insists it can do better still.

The proxy voting will decide the issue; the Crown Crafts annual stockholder meeting will be held on Aug. 14.

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