NEW YORK, Dec. 18, 2013 /PRNewswire/ -- Mr. Ephraim Fields of Echo Lake Capital today announced he had issued the following letter to the Board of Directors of Edgewater Technology, Inc. (EDGW).December 18, 2013
It appears to us that Christmas once again came early and undeservedly for the senior management of Edgewater Technology, Inc. ("EDGW") as a recent 8-K filing indicates you approved significant compensation increases for them.
Your decision to continually provide increased compensation for people whom we believe have repeatedly underperformed (based on both qualitative and quantitative measures) raises serious questions about both your motivations and willingness to uphold your fiduciary responsibility to act in the best interests of all shareholders.
Furthermore, we believe your decision to file the 8-K late in the day on a Friday, two days after signing the Agreements, raises questions about the level of transparency the company is providing its stakeholders. If the Agreements were approved on December 4th, why was the 8-K not filed until late in the day on Friday December 6th? Since it does not typically take the company that long to file an 8-K, we wonder if you were attempting to "bury" the filing and minimize attention it would receive from EDGW's various stakeholders.
We remain concerned that there is an inappropriately "cozy" relationship at EDGW whereby Board Members (whom, as we have discussed in our previous letters, we believe are overpaid, lack appropriate skills and lack appropriate incentives) continue to enrich senior management (including the Chairman of the Board) and, in exchange, the Board Members themselves are also rewarded with increasingly generous compensation. While such a relationship might be great for you and senior management, it sadly comes at the expense of EDGW's non-management shareholders.
After reading the 8-K we have some questions which we believe would be of interest to EDGW's various stakeholders:
- Considering Ms. Singleton, Mr. Clancey, Ms. Ranzal-Knowles and Mr. Oakes collectively made $2.8 million in 2012 (the last year for which such data is available), which was almost 2x the company's net income for that year, do you really believe these individuals deserve even more compensation?
- What exactly has Ms. Singleton accomplished to deserve a contract extension and a 21% increase in her minimum annual base salary for 2014? Do you feel she has management skills, technological insights or other attributes that cannot be provided by other, less expensive CEOs? You can clearly see how EDGW's stock has repeatedly underperformed over the past 10 years under her leadership, so why do you continue to retain her services? On a related note, have you ever conducted any confidential internal research to determine how Ms. Singleton is viewed by EDGW's employees? (You can probably guess what our research has concluded).
- Now that you have granted senior management significant pay increases for 2014, will you, the Board of Directors also be receiving pay increases?
- Now that you have granted Ms. Singleton and Mr. Clancey increases in their minimum annual base salary for 2014 of 21% and 25%, respectively, can all EDGW employees expect similar pay increases?
- What is your justification for approving even more generous change of control packages? Clearly a potential result of this is to further enrich senior management while harming shareholders by reducing the price a potential acquirer would pay for EDGW's shares.
The 8-K included other compensation increases which we also find distasteful and not in the best interests of EDGW's shareholders. If you believe you can continue to cover over both your and senior management's long-standing poor performance by burying 8-K filings and by issuing irrelevant and self-serving press releases, we strongly suggest you refocus your efforts and begin to take steps that are truly in the best interests of all the shareholders.
Contact: Ephraim Fields at (212) 259-0530
SOURCE Ephraim Fields