Darden Restaurants Inc lost its standoff with activist shareholder Starboard Value LP at its annual meeting on Friday, when stakeholders tossed out the Olive Garden parent's entire board in a rare victory for dissident investors.
The election of Starboard's 12-person slate is a feather in the cap for the New York hedge fund, which is Darden's second-largest investor with an 8.8 percent stake.
It also is a stinging defeat for Darden, which earlier this year alienated many investors by brushing off their vote requesting a special meeting to debate the merits of the company's then-proposed sale of its struggling Red Lobster chain.
The "extraordinary" and "totally self-inflicted" loss for Darden should not come as a surprise given Darden's "tone deafness" to investor wishes regarding the sale of the Red Lobster, said Charles Elson, director of the Weinberg Center for Corporate Governance in Newark, Delaware.
"It was kind of done deal, wasn't it?" agreed Karl Sooder, a Darden investor and University of Central Florida marketing professor, who attended Darden's annual meeting in an Orlando hotel conference room on Friday.
The board sweep at Darden is notable because of the size of the company, which is the largest U.S. operator of full-service restaurants with $8.55 billion in 2013 sales, experts said.
Still, some smaller U.S. companies recently have suffered a similar fate.
For example, shareholders in ALCO Stores Inc in September replaced the full board at the retailer that serves small U.S. communities. Last year, investors replaced the whole board at Morgans Hotel Group Co.
