NEW YORK (Reuters) - Some Massey Energy Co MEE.N shareholders are vowing to vote down three board members in a proxy battle over the coal company’s safety record following a blast that killed 29 miners in West Virginia.
Tuesday’s shareholder meeting in Richmond, Virginia is also viewed as a referendum on the stewardship of Don Blankenship, Massey’s chief executive officer, who has denied charges the company traded safety for profit.
Whether Massey’s two major institutional shareholders will side with the dissidents is unknown, although both Fidelity Investments and BlackRock Advisors stressed their voting policies were based on enhancing shareholder value.
Indeed, Massey’s stock has plummeted over 30 percent in the six weeks since the explosion at the Upper Big Branch mine. It was down 4.3 percent at $36.41 on Friday morning on a day when the broad market fell. Massey was at a year-high price of $54.80 on April 5 when the accident occurred.
“BlackRock acts solely as a fiduciary for our clients and has a rigorous process to ensure we cast proxy votes in the best long-term economic interest of fund investors,” spokeswoman Bobbie Collins said in a statement. BlackRock owns 8.7 million, or just over 9 percent of Massey stock.
Fidelity, which owns 9.1 million shares, or 9.5 percent of Massey’s common stock, said in a statement that it generally votes “in favor of incumbent and nominee directors except where a director has failed to exercise reasonable judgment.”
But it believes there is a “strong correlation between enhancing shareholder value and sound corporate governance.”
Both major corporate proxy advisory services have recommended shareholders vote “no” for the directors, Richard Gabrys, Dan Moore and Baxter Phillips, Jr., who is also the coal company’s president.
CtW Investment Group, a coalition of union-backed investment funds, which owns less than one percent of Massey stock, has called for the directors’ removal, citing Massey’s poor safety record.
“The Upper Big Branch mine explosion has already begun to negatively impact shareholder value at the company,” said proxy advisory firm Glass Lewis & Co, which recommends voting against the three directors.
“Following the incident, a selloff in company stock erased $820 million in market value over a two-day period,” it noted, adding that Massey has said it will take a charge of $80 million to $150 million in the second quarter.
It warned additional regulatory scrutiny may also result in a reduction in the company ratings by Standard & Poor’s.
“Ordinarily, we would only consider recommending that shareholders hold directors accountable following more conclusive findings about the extent to which the company was responsible for such accidents,” the Glass Lewis report said.
“However, due to the history of safety problems at the mine in question...coupled with the significant financial impact on the company from this incident, potentially due to faulty safety practices, we believe that shareholders would be better served by new board oversight.”
A report by ISS/RiskMetrics said the key issue among dissident shareholders was the lack of board oversight of management, particularly on the issue of safety.
“The dissident group pointed to extensive statistics from the Mine Safety & Health Administration, highlighting high levels of compliance failures at both the UBB mine and other Massey operations over the last few years,” it said.
“Both CtW and the pension funds believe that the Safety, Environmental and Public Policy Committee (SEPPC) of the board should be held accountable for the dismal safety record at the company. Shareholders should note that all three nominees at this year’s annual meeting are members of the SEPPC.”
CtW has been joined by a group of state pension funds, including the largest U.S. public pension fund, CalPERS (California Public Employees’ Retirement System). It said on Friday it would vote against the Massey directors.
“CalPERS believes Massey’s serious and repeated health and safety violations leading up the most recent Upper Big Ranch mine tragedy and subsequent destruction of shareowner value indicate a significant lack of accountability.”
Reporting by Steve James, editing by Leslie Gevirtz