Spok Holdings, Inc. (SPOK) Earnings Call Transcript & Summary

Good morning, and welcome to the 2020 Spok Holdings, Inc. Annual Meeting of Stockholders. I would now like to turn the meeting over to Vince Kelly, President and Chief Executive Officer. Please go ahead, sir.

Thank you, and good morning. It is my pleasure to welcome you to the 2020 Annual Meeting of Stockholders of Spok Holdings, Inc. I am Vince Kelly, President and Chief Executive Officer of the company, and a member of its Board of Directors. I will act as Chairman of this meeting and Sharon Woods Keisling, Secretary of the company, will act as Secretary. The representative of American Election Services will act as Inspector of Elections. I have been informed by Ms. Woods that she has received the proof of notice affidavit from Broadridge asserting that it has mailed to each stockholder of record as of the close of business on June 19, 2020, the record date, a notice advising stockholders of the annual meeting as well as a full set of proxy materials, including a proxy card. The proof of notice affidavit will be included as part of the record of this meeting. In addition, I've been advised that a quorum is present. The meeting is now called to order. Before we begin with the formalities of the annual meeting, I would like to introduce Michael Wallace, the company's Chief Operating and Chief Financial Officer, and the members of the Board of Directors who are joining us today. Royce Yudkoff, Chair of the Board; Matthew Oristano, Chair of the Board's Audit Committee; Samme L. Thompson, Chair of the Board's Nominating and Governance Committee; Brian O'Reilly, Chair of the Board's Compensation Committee; Stacia Hylton, Chair of the Board's Cybersecurity Committee; and additional Board members, Blair Butterfield, Todd Stein, Dr. Bobbie Byrne, Christine Cournoyer and Brett Shockley. Thank you. We will now turn to the business of the annual meeting. This year, we will vote on 5 proposals and announce the voting results at the end of the meeting. We will then adjourn the meeting. Questions relevant to this meeting will be addressed after we adjourn and can be submitted through the virtual meeting website at any time. We will now present the proposals to be acted upon at the meeting. The first proposal is the election of directors. Each of the 10 director nominees, if elected, will be elected to a 1-year term to serve until their respective successors have been duly elected or appointed. The following director nominees are standing for election: Mr. Butterfield, Dr. Byrne, Ms. Cournoyer, Ms. Hylton, Mr. Kelly, Mr. O'Reilly, Mr. Oristano, Mr. Shockley, Mr. Stein and Mr. Yudkoff. The Board recommends a vote for each of the nominees. The second proposal to be considered is the ratification of the appointment of Grant Thornton LLP as the company's independent registered public accounting firm for the year ending December 31, 2020. The Board recommends a vote for the ratification of Grant Thornton LLP. The third proposal to be considered is the advisory vote to approve 2019 named executive officer compensation. The Board recommends a vote for the advisory vote to approve 2019 named executive officer compensation. The fourth proposal to be considered is the approval of our 2020 equity incentive award plan. The Board recommends a vote for the approval of the 2020 equity incentive award plan. And the final proposal to be considered, if properly presented, is a stockholder proposal regarding board independence and refreshment. Mr. Vardeman from Palogic Value Fund has 3 minutes to present this proposal. Mr. Vardeman, please go ahead.

I'm Ryan Vardeman, principal and a general partner of Palogic Value Fund. In behalf of Palogic Value Fund LP, beneficial owner of 733,000 Spok shares of common stock, a stockholder since 2014, I move for adoption by Spok stockholders of the proposal titled Board Independence and Refreshment, set forth in Spok's proxy as proposal #5. The resolution is as follows: Resolved, shareholders of Spok Holdings, Inc. request adoption of a policy that would require at least 67% of the Board of Directors to have less than 15 years total Spok director tenure. This policy would be implemented in a manner that does not violate any of the company's current contractual obligations. Purpose and background. After a particular tenure, we believe that director independence for management can become compromised. According to ISS, a tenure of more than 9 years potentially compromises a director's independence. A number of foreign jurisdictions have adopted director tenure-related rules or limitations for independent directors, including the European Commission, which recommends that European Union-based companies limit director tenure to 12 years. Additionally, CalPERS, in their most recent "Governance and Sustainability Principles" publication suggests that director's independence can be compromised after service of longer than 12 years. We believe that the Board of a public company should have a majority of truly independent board members that are not tied to a multi-decade long legacy with management. This is particularly true when these directors are acting in capacities such as Chairperson of the Nominating and Governance, Compensation and Audit committees. At Spok, 5 out of the 8 directors in the 2019 proxy had greater than 15 years tenure, including all members of the Nominating and Governance Committee and Compensation Committee. When considering that the CEO has also been at the company during this 15 year-plus time frame, we are concerned that Mr. O'Reilly, Mr. Oristano and Mr. Yudkoff may have lost independence from management and their ability to evaluate the company objectively. We are disappointed that ISS has advised against this proposal and believe that this new policy will strengthen director independence and objectivity as the lengthy tenure of multiple directors may have fostered a culture of deference to management. This is simply illustrated with the approximate negative 37% total return to Spok shareholders since the new product strategy was announced in 2015, a negative 5.5% return since the acquisition of Amcom in 2011 almost a decade ago.

Thank you. The Board recommends a vote against this stockholder proposal. The polls are now open, and voting may now occur. Any stockholder who hasn't yet voted or wishes to change their vote may do so by clicking on the Voting button on the web portal and following the instructions there. Stockholders who have voted by proxy need not vote again unless they wish to change their vote. We'll give you a little bit of time for the voting. [Voting]

Okay. The polls are now closed. The results of the vote will be reported as soon as the Inspector of Elections provides the information to me. Again, I will remind you that any questions relevant to this meeting can be submitted through the virtual meeting website at any time. I have been advised that the Inspector of Elections has completed the preliminary vote count. The Inspector of Elections has informed me that sufficient votes have been received in favor of the named nominees for director and all nominees have been elected. Sufficient votes have been received to ratify the appointment of Grant Thornton LLP as the independent registered public accounting firm for the year ending December 31, 2020, to approve the company's 2019 named executive officer compensation, and to approve the company's 2020 equity incentive award plan. The stockholder proposal was not approved. The Inspector of Elections will make a final report that will be included as part of the record of this meeting. The company will report final voting results in a filing with the Securities and Exchange Commission. With no further business to be conducted, the meeting is now closed. Okay. We'll now begin the question-and-answer session on topics relevant to this meeting. [Operator Instructions] We have no questions. So thank you for attending our annual meeting. We look forward to meeting with you again next year.

This now concludes the meeting. Thank you for joining, and have a pleasant day.