{"id":493107,"date":"2021-05-13T09:03:53","date_gmt":"2021-05-13T13:03:53","guid":{"rendered":"https:\/\/www.marketnewsdesk.com\/index.php\/indaba-issues-letter-to-the-board-of-directors-of-benefitfocus-regarding-recent-governance-lapses\/"},"modified":"2021-05-13T09:03:53","modified_gmt":"2021-05-13T13:03:53","slug":"indaba-issues-letter-to-the-board-of-directors-of-benefitfocus-regarding-recent-governance-lapses","status":"publish","type":"post","link":"https:\/\/www.marketnewsdesk.com\/index.php\/indaba-issues-letter-to-the-board-of-directors-of-benefitfocus-regarding-recent-governance-lapses\/","title":{"rendered":"Indaba Issues Letter to the Board of Directors of Benefitfocus Regarding Recent Governance Lapses"},"content":{"rendered":"

<\/p>\n

\nIndaba Issues Letter to the Board of Directors of Benefitfocus Regarding Recent Governance Lapses\n<\/p>\n

SAN FRANCISCO–(BUSINESS WIRE<\/a>)–
\nIndaba Capital Management, L.P. (together with its affiliates, \u201cIndaba\u201d or \u201cwe\u201d), which beneficially owns approximately 9.9% of the outstanding common shares of Benefitfocus, Inc. (NASDAQ: BNFT) (\u201cBenefitfocus\u201d or the \u201cCompany\u201d), and approximately 22.9% of the outstanding issue of the Company\u2019s 1.25% convertible senior notes, today issued the below open letter to the Company\u2019s Board of Directors (the \u201cBoard\u201d):\n<\/p>\n

\nMay 13, 2021\n<\/p>\n

\nThe Board of Directors
\n
Benefitfocus, Inc.
\n
100 Benefitfocus Way
\n
Charleston, South Carolina 29492\n<\/p>\n

\nDear Members of the Board of Directors,\n<\/p>\n

\nIndaba Capital is a major holder of the common shares and convertible senior notes issued by Benefitfocus. The Board is well aware of our concerns regarding the Company\u2019s troublesome governance, concerning related party transactions, poor succession planning and weak financial results. The Board is also aware that we recently made a concerted effort to reach a good faith settlement that provided for Indaba withdrawing its nominations and accepting customary settlement terms in exchange for Benefitfocus adding a single shareholder-appointed director, Ronald P. Mitchell, to a Board of seven directors. We find the Company\u2019s refusal of such a modest addition to be extremely unusual and it leaves us questioning why the Company is so fiercely opposed to welcoming an independent shareholder designee into the boardroom. What does Benefitfocus have to hide? <\/i><\/p>\n

Unfortunately, since we began engaging with Benefitfocus in late 2020, we believe the Board has demonstrated a perpetual disregard for honest shareholder engagement and sound governance.<\/span> Benefitfocus has failed to enact anything other than incremental, reactionary measures. The decisions to cut ties with long-tenured director Mason Holland Jr., declassify the Board and finally add a diverse director only came after Indaba raised concerns. Likewise, director A. Lanham Napier\u2019s BuildGroup LLC only terminated its off-market voting agreement with Mr. Holland after we sounded the alarm.\n<\/p>\n

\nThe Company\u2019s recently filed preliminary proxy reinforces our view that the Board has no interest in meaningful and substantive governance improvements. Despite the Company\u2019s promise to de-stagger the Board, we suspect that the decision to have common shareholders elect only one Class II director at the 2021 Annual Meeting \u2013 after she just recently joined \u2013 was made to deter Indaba from pursuing shareholder-driven change at the top of the Company. Further, next year, common shareholders will only be able to vote on three out of seven directors if the declassification proposal passes at the 2021 Annual Meeting and the Board remains at its current size. Once again, we believe Benefitfocus has shown a complete disregard for corporate governance.\n<\/p>\n

In addition to maintaining this seemingly anti-shareholder culture, the Board has also failed to follow through on one of its most fundamental duties: maintaining stability at the management level.<\/span><\/p>\n

\nThe lawsuit filed last week against now current Chief Executive Officer Matthew Levin by ADP, Inc. (\u201cADP\u201d) is troubling. It alleges that Mr. Levin breached his contractual obligations to ADP, breached his duty of loyalty and misappropriated trade secrets. Given the vast internal and external resources that Benefitfocus has at its disposal, we find it completely unacceptable that the Board chose to hire (and publicly announce) a leader who has already exposed himself and shareholders to significant risks, distraction and potential liability.\n<\/p>\n

\nWhile Mr. Levin may have strong experience and be a good candidate on paper, we question the process that has resulted in this highly concerning situation. The hiring decision seems to reflect a lack of diligence and thoughtfulness on the part of the Company\u2019s directors, especially considering the Board has overseen three other chief executive officers and six chief financial officers since 2015. Mr. Levin\u2019s appointment would make him the Company\u2019s fourth Chief Executive Officer in the past four years.\n<\/p>\n

\nWe believe the Board owes shareholders far more detail than what was included in last week\u2019s sparse 8-K filing. In particular, we want answers to questions that include:\n<\/p>\n