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Proxy advisory firm Glass Lewis & Co. is recommending shareholders of Aberdeen International Inc. replace executive chairman Stan Bharti with dissident shareholder Ryan Morris at a shareholder vote next week.
Citing the need for "additional outside scrutiny and independent oversight" at the money-losing junior mining holding company, the Glass Lewis report recommended Mr. Bharti step down as a director because of "a significant number of potential conflicts." Mr. Bharti's family owns Forbes & Manhattan, a private Toronto mining finance company that earns fees and other benefits from Aberdeen. Forbes & Manhattan has stakes in a variety of junior resource companies with which Aberdeen has lent money, exchanged assets and, in some cases, share directors.
Glass Lewis is the second advisory firm, following Institutional Shareholder Services Inc. last week, to call for Mr. Morris to replace Mr. Bharti. Mr. Morris and British fund manager Nightscape Capital own 9 per cent of Aberdeen's shares and are seeking to replace all seven of Aberdeen's directors. The investors are calling for a new independent board to end what they allege are lavish compensation, loans and stock sales that favor insiders.
Glass Lewis recommended shareholders vote against Mr. Morris's remaining six directors because of the proposed candidates' limited mining experience.
In a press release, Aberdeen did not mention the recommendation to replace Mr. Bharti with Mr. Morris. Instead the company cast the Glass Lewis report as a rejection of the activist's attempt to interfere with "Aberdeen's strong, experienced board."
Mr. Morris, a San Francisco based activist, launched both his proxy battle and a lawsuit earlier this month. He alleges Aberdeen failed to act in the best interests of shareholders by privately selling the vast majority of 10 million shares and warrants at a substantial discount to officials and companies closely affiliated with Aberdeen and Forbes & Manhattan.
The close ties of the buyers benefiting from the securities sale "leads us to question whether the board was acting in the best interest of shareholders when it approved the placement," the Glass Lewis report said.
Shareholders are set to vote for Aberdeen directors at a special meeting Feb. 3 and the deadline for advance voting is Jan. 30.