CEO Uses Shares to Secure Personal Loans, Directors Urged to Act
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UPDATED: May 3, 2013
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A large shareholder advisory firm issued a report this week urging Swift Transportation shareholders to withhold their votes from board members due to reports that the CEO used outstanding shares as collateral for personal loans.
Institutional Shareholder Services Inc. (ISS) requested that members of the Swift Transportation Company Board of Directors’ Audit Committee withhold votes during their annual shareholder meeting on May 8.
Jerry Moyes, Swift Transportation’s founder, CEO and controlling shareholder, pledged almost 25 percent of outstanding shares as a form of collateral for personal loans.
ISS attributed their request for action to a growing concern over the “material risk and potential conflicts of interest created by pledging the shares.”
The International Brotherhood of Teamsters also showed their support. In a released letter, Teamsters, a long-term investor of Swift Transportation, urged the Board of Directors to adopt a new policy prohibiting any future stock pledges by Swift directors or executives.
Teamsters General Secretary Treasurer, Ken Hall, said Moyes’ actions are “indefensible.”
“It is vital that this board exercise its independence and authority to protect the interests of public shareholders,” Hall wrote in the letter.
The Board currently allows employees or directors to pledge up to 20 percent of their family holdings, according to a Swift Transportation company policy. Moyes and several affiliates pledged just over 12 million shares for a variety of personal loans. In addition, he also pledged an additional 23.8 million Class B common stock shares. These Class B shares alone represent $262.3 million in value of Class A common stocks.
According to the Teamsters letter, Moyes and his affiliates have pledged a total of 35.8 million shares, or nearly two-thirds of his entire equity stake in Swift Transportation, and about 25 percent of the total outstanding shares.
Swift Transportation did not respond to a request for comment.
Teamsters said that adopting a new policy would be difficult, but necessary.
“There needs to be meaningful board oversight and management accountability even at a controlled company like Swift,” Hall said in the letter. “Someone needs to tell Jerry Moyes to stop using Swift’s corporate coffers as his own personal piggy bank.”