Select Comfort: Disposable Directors?
from September/October 2008
by Lois Gilman
It looks like at least one good intention went bump in the night for bed and mattress manufacturer Select Comfort, which last year set 15-year term limits for directors (“How the Board Put the Bounce Back in Select Comfort,” May/June 2007). Now it has changed its mind. That’s why venture capitalist Christopher P. Kirchen, 65, a director since 1991, didn’t step down at the annual meeting in May after all; instead, he was elected to a seventh three-year term. The company has also had second thoughts about another 2007 change—it has abolished a plan to set a mandatory retirement age of 72 for directors. In place of these two short-lived reforms, more complicated rules now empower the governance committee to ask one or more directors to resign if the median tenure of the board exceeds 8.5 years or if the majority of the directors are 60 or older.
“I view this as the next evolution,” says non-executive chairman Ervin Shames, 67, a consultant and lecturer at the University of Virginia’s business school. “When the time comes for someone to go, you look at the needs of the company [rather than time served on the board or a board member’s age]. One director’s skill set may be less important than the others’. This is a harder policy to implement, but it’s better for the shareholders.” Only four of the 11 board members are over 60, and the board’s median tenure is eight years, which gives the governance committee wiggle room.
The fact that Shames, formerly lead director, is chairman shows that Select Comfort has stuck to one reform, a pledge to split the two top jobs. And, as promised, the company has increased the board’s diversity somewhat by adding a third woman, Kristen Manos, 48, executive vice president of furniture maker Herman Miller.
Governance standards may not be what keeps Select Comfort’s shareholders awake, however. In April the company surprised Wall Street with a $7.1 million loss for the first quarter on a 22% drop in sales. The stock fell 89% from September 12, 2007, to $1.93 on June 26. The NASDAQ, where it trades, fell 1% over the same period.
