Voce says SEC Investigation at Argo ‘highlights need for urgent changes’

Voce Capital Management, the beneficial owner of approximately 5.4 percent of the shares of Argo Group International Holdings, has said that the ongoing Securities and Exchange Commission (SEC) investigation at Argo related to executive compensation and benefits and associated disclosure issues highlights the need for urgent changes.

“Earlier this year Voce published a detailed case demonstrating that a culture of indulgence, entrenchment and failed oversight has plagued Argo under the aegis of the current board,” it said in a statement.

“Beginning with a public letter to our fellow shareholders on February 25, 2019, and supported through a number of subsequent communications, including our 131-page white paper, Righting the Ship, we chronicled Argo’s decrepit corporate governance, particularly as it relates to the board’s lack of proper oversight of management and the absence of any delineation between corporate assets and priorities and those of management. We also called for ‘a top-to-bottom investigation of Argo’s corporate governance practices.’

“Based on Argo’s response to a media report breaking the news of an SEC investigation into these matters, apparently the board has finally undertaken such a review. It’s a shame that it required an SEC subpoena to force the board to do its job.”

The statement reiterated claims that the board had “wasted more than $7million of shareholder capital at this year’s annual meeting to preserve the status quo and to prevent the addition to the board of even a single director nominated by shareholders”.

Voce added: “Instead of investigating our claims, the board summarily brushed aside all of our concerns and represented to shareholders that the corporate governance issues we raised were ‘absurd,’ ‘spurious,’ ‘uninformed’ and ‘egregious’ ‘misrepresentations, careless errors and outright falsehoods.’ Apparently at least one federal investigative agency didn’t see it that way.

“In August of this year, Voce reached out to Argo’s board to request a meeting with its independent directors. In the ensuing discussions, Voce made a series of proposals to restructure Argo’s board and reform its corporate governance. While the tenor of the discussions has been polite and professional, as of today Voce has been unable to reach agreement with the board.”

Voce’s statement said that the disclosure that the company is under federal investigation “vividly illustrates” the need for immediate and sweeping changes at Argo. It said the activist group does not believe that a board “that allowed myriad corporate governance transgressions at Argo can be trusted to deliver the company from the resulting crisis which now engulfs it”.

It said it was “imperative” that shareholders have full faith and confidence in the group of individuals making those determinations, adding “that simply will not happen with the board as currently constituted”.

Voce has called for the retirement of the legacy ‘big five’ directors; the replacement of some of the ‘big 5’ with new independent directors nominated by shareholders; and the creation of a Special Committee (the “Special Committee”), comprised of independent directors to respond to the SEC subpoena and to conduct a comprehensive investigation into potential misappropriation of corporate assets, inaccurate disclosures of executive compensation and perquisites, and any other misconduct.

The board rejected each of these proposals.

Voce said: “In our efforts to engage the board over the proposals we made, the board maintained that it has other priorities at the moment. And that is precisely our point: given its track record, shareholders simply have no reason to trust anything done by the current board. We urge the board again not to enact any further corporate governance changes until the board is reconstituted to include shareholder representation.”

Argo was approached for a response to the claims but had not responded at the time of publication.

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