Sierra Capital Investments LP criticized Safeguard Scientifics Inc.'s new nomination procedures, which Safeguard introduced 10 days before the deadline for shareholder nominations for the upcoming 2018 annual meeting.
Sierra Capital, which owns approximately 5.1% of the company's outstanding shares, stressed that the new nomination procedures will only "embolden" it to nominate director candidates.
"We are utterly dismayed by [Safeguard's] growing list of bad-faith actions during a time when we are seeking to reach an amicable resolution and avoid a proxy contest at Safeguard," Sierra Capital wrote.
The shareholder also criticized the involvement of President and CEO Steve Zarrilli in the nomination process over their "clear conflicts of interest." Sierra Capital noted that the nominating and corporate governance committee, not management, is responsible for screening potential board candidates, and recommending qualified candidates to the board for nomination.
Another shareholder, Yakira Capital Management Inc., was critical of the nomination process in a letter to board chairman Robert Rosenthal, saying Zarrilli was vetting its candidates.
Yakira Capital, which owns 2.41% of outstanding Safeguard shares, questioned why Rosenthal and the nominating and corporate governance committee are not involved in the interview process for potential board members who may be tasked with replacing management.