ISS, a proxy advisory service, changed its recommendation from "FOR" to "AGAINST" On Track Innovations' (OTIV) nominees to the company's board of directors. This move was precipitated after ISS reviewed the 13D filing of dissident shareholder Jerry Ivy and Ivy's "VOTE NO" campaign against the company's nominees.
Apparently, ISS agrees with IVY. ISS states that "A vote against these elections is warranted given the company's continued poor financial and stock performance over the past several years, as well as concerns about compensation and corporate governance."
This is a severe blow to OTIV's current management and board of directors, a group of individuals who, in my opinion, are "rubber stamps" to the wishes of company CEO and Chairman, Oded Bashan. ISS cites poor corporate governance by having a CEO sit on the compensation committee. This is a committee that approved high executive compensation when losses keep piling up year over year.
In a face to face meeting with OTIV director David Stone on September 20, 2012, Stone told me that the company has to improve corporate governance. Telling me is one thing, but getting the company to change the manner in which they govern is another thing.
Currently, management holds less than 8% of the outstanding shares of OTIV and I believe they face an uphill battle to get their board nominees approved. I believe that the company's nominees will be rejected by an OVERWHELMING vote of shareholders at the annual meeting on November 9, 2012. Unfortunately, we may never know the vote tally, as the company has a past history of just announcing the passage or failure of a proxy.
The implications of a change in the board of directors (and company management) to shareholders or future investors are many. The current price per share ($1.12) is a clear indication that the investment community lacks confidence in OTIV management and its board of directors. With a new board (or management) there is always the possibility that OTIV could be sold, but I believe that Ivy and his "team" believe in the huge potential of OTIV's patents regarding contractless payments and security, and their ability to capitalize on OTIV's patent portfolio could be a huge winner for OTIV shareholders.
Disclosure: I am long OTIV.