Dive Brief:

• Glass Lewis is recommending that Masimo shareholders vote to elect two candidates nominated by activist investor Politan Capital Management to serve on the pulse oximeter maker’s board of directors, the proxy advisory firm said Thursday.
• In its report, Glass Lewis said it has “rarely” seen a circumstance where the “need for direct representation of a large shareholder in the boardroom was so apparent and potentially impactive.”
• The firm’s recommendation Thursday follows a similar report this week from proxy adviser ISS that also backed Politan Chief Investment Officer Quentin Koffey and Johnson & Johnson staffer Michelle Brennan for seats on Masimo’s board.

Dive Insight:

“As two independent directors on a seven-member board that will include two additional independent directors to be appointed by the reconstituted board following the annual meeting, we believe the Politan nominees would have a clear mandate from shareholders and are capable of working constructively with other board members,” Glass Lewis stated.

Politan, which holds a 9% stake in Masimo, has accused the producer of patient monitoring systems and sensors of poor corporate governance and an inability to profitably innovate.

Masimo, for its part, has defended its record, arguing that it has delivered strong returns for shareholders and consistent above-market growth.

Accountability is needed at Masimo for its “long track record of poor corporate governance” and “questionable strategic and capital allocation decisions,” Glass Lewis said in a statement from Politan. 

Masimo’s shares have lost nearly half their value, trading around $163 currently, after reaching a peak above $300 in late 2021. Politan blames the downturn on the company’s acquisition of Sound United, owner of consumer audio brands such as Denon, which Masimo announced in February 2022 that it would buy for about $1 billion.

“Masimo’s unprecedented collapse in value reveals a crisis of confidence,” Koffey wrote in a May 23 letter to Masimo shareholders. “Declining by five times the purchase price, Masimo’s $5 billion drop in market value following the Sound United acquisition was not simply about the transaction. Rather, it revealed shareholders’ concern that no Board oversight exists to stop future value destruction.”

Masimo has said it is opposed to working with Koffey but agreed to support Brennan if its shareholders vote to expand the size of the board to seven members.