Tom Naratil, former president of UBS Americas and chief executive of UBS Americas Holding, is one of four people nominated by Impactive Capital to join Envestnet’s board of directors in an escalating proxy contest.
Impactive, a $2.8 billion activist hedge fund, owns a 7.5% stake in Envestnet, one of the largest providers of technology and outsourced investment management to financial advisors. Over the past five years, Envestnet’s stock price has underperformed the S&P 500 by 61%, according to Impactive.
In November, the hedge fund published an open letter expressing dissatisfaction with the stock's performance and “a number of disappointing decisions that … have resulted in in shareholder value destruction.” While the November letter sought to secure a single seat on Envestnet’s board for Impactive, the company's refusal to engage has the hedge fund looking for more significant leadership change, according to a statement from Lauren Taylor Wolfe, Impactive’s co-founder and managing partner.
“Over the past 18 months, during which Impactive has sought to productively engage with the Board, we steadfastly expressed our view that Envestnet is a high-quality business with substantial opportunity for value creation, particularly given its dominant market position,” Taylor Wolfe said in a statement. “Unfortunately, our efforts to collaborate privately were rebuffed, leaving us with no choice but to publicly express why change is required at Envestnet.”
Five of Envestnet’s current directors have served on that board over the past five years, while a sixth served as the company’s president, Impactive claims. In addition to the stock's underperformance during this period, Taylor Wolfe said Envestnet’s board oversaw poor capital allocation and operating performance while expanding compensation for management and board members.
“In our view, the current board has displayed a lack of management oversight as well as financial and capital allocation expertise, and its willingness to continue to increase compensation for both management and its own members irrespective of performance represents to us an abandonment of fiduciary responsibility,” Taylor Wolfe said in the statement. “Given the disappointing returns, margin underperformance, and questionable governance over which the current Board has presided, we have concluded that change is required for all directors up for election at this year’s annual meeting.”
Naratil stepped down from his roles at UBS in October. In addition to his leadership positions at UBS, Naratil has experience with Envestnet as both a customer and partner. Naratil approved a collaboration between UBS, Envestnet and alternative investments fintech iCapital to launch an alternatives marketplace in March.
In addition to Naratil and Taylor Wolfe, Impactive has also nominated Wendy Lane, chair of private equity firm Lane Holdings, and Michael Stanton, former chief financial officer of software company Diligent Corp.
“The Envestnet board of directors and management team are committed to acting in the best interests of the company and all shareholders, and the board will present its recommendation regarding director nominees in the company’s proxy materials,” Amy Norcini, Envestnet’s principal director of communications, said in an email. “In the meantime, the company continues to focus on achieving its strategic goals and creating value for shareholders.”
Shares of Envestnet are up more than 11% since Impactive published its letter Nov. 15, which the fund said is proof of shareholders’ desire for change. The stock is currently up 2.68% since Impactive announced its four nominees Wednesday morning.
Envestnet has a market capitalization of $3.4 billion, according to Reuters.
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