Parkland Corp.’s shareholder Engine Capital, which holds 2% of Parkland’s outstanding shares, has reported it will withhold support on all incumbent directors at the Annual Meeting of Shareholders.
This comes after Engine Capital informed Parkland of its underperformance based on the company’s shareholder returns.
“We believe that this underperformance is directly related to Parkland’s current complexity and conglomerate structure, which makes it a poor public company in its current structure,” stated Engine Capital in a letter recently sent to Parkland.
Engine Capital also gave suggestions to Parkland on how to enhance its shareholder value, including selling or spinning off non-core assets or selling the whole company, adding new directors with the appropriate experience, or improving the company’s compensation framework to match management’s incentives with shareholders’ interests.
Engine Capital was also disappointed to see that Chairman Jim Pantelidis, who has served on the Board for 24 years, intends to serve for another three years, despite Parkland’s adoption of a 10-year term limit.
“This is even more shocking considering that Parkland has just adopted a tenure policy that limits a director’s tenure to 10 years. This policy should apply to all directors, including the company’s chairman, especially considering that he has been on the board for almost a quarter of a century,” Engine stated in the letter. “Clearly, an orderly transition and appropriate succession planning can take place much faster. The fact that the board is suggesting Mr. Pantelidis needs to remain as chairman for another three years in order to effectuate a smooth transition is another example of the board’s complete lack of urgency. We, therefore, urge the board not to re-nominate Mr. Pantelidis at the 2024 Annual Meeting.”
Along with these concerns, Engine Capital mentioned its concerns about Parkland’s compensation practices. Engine referred to the recently published management information circular that discussed the board’s decision to use an absolute return on investment capital (ROIC) measure as part of management’s long-term incentive.
“Unfortunately, the targets set by the board are completely inadequate and are lower than the company’s cost of capital, which we estimate to be well above 8.5% (where management would receive 200% of its target compensation). We are concerned that the board would reward management at these poor levels of ROIC and set 7% as the ROIC target,” said Engine Capital.
Engine Capital even called on CEO Robert Espey because his target total direct compensation went up to $5.3 million from $4.3 million in 2021, an increase of approximately 23%, according to the letter.
However, Engine Capital asked to meet with the board but was offered a meeting with Parkland’s Chief Financial Officer Marcel Teunissen, where Engine Capital discussed meeting with the entire board. As of now, Parkland has not responded with a meeting time or date.
Parkland is an independent supplier and marketer of fuel and petroleum products and a leading convenience store operator. Parkland services customers across Canada, the U.S., the Caribbean region and the Americas through three channels: retail, commercial and wholesale. Parkland optimizes its fuel supply across these three channels by operating and leveraging a growing portfolio of supply relationships and storage infrastructure. Parkland provides trusted and locally relevant fuel brands and convenience store offerings in the communities it serves.