Sleep Number Comments on Public Letter to Shareholders from Stadium Capital Management
Sleep Number (SNBR) has responded to Stadium Capital Management's public letter to shareholders regarding CEO succession. The company highlighted its comprehensive CEO search process, led by the Management Development and Compensation Committee with support from Korn Ferry. Despite extensive engagement with Stadium, including adding two Stadium-recommended directors and multiple meetings, Stadium made an unusual demand for direct participation in the CEO succession process. The Board maintains its current approach is robust and best-in-class, featuring weekly committee meetings, independent oversight, and full Board involvement in the final decision. The company has already identified qualified candidates and remains open to shareholder input while prioritizing an effective succession.
Sleep Number (SNBR) ha risposto alla lettera pubblica di Stadium Capital Management agli azionisti riguardo la successione del CEO. L'azienda ha messo in evidenza il suo processo di ricerca del CEO, gestito dal Comitato per lo Sviluppo e la Compensazione della Direzione con il supporto di Korn Ferry. Nonostante un ampio coinvolgimento con Stadium, inclusa l'aggiunta di due direttori raccomandati da Stadium e numerosi incontri, Stadium ha avanzato una richiesta insolita per una partecipazione diretta nel processo di successione del CEO. Il Consiglio mantiene che l'approccio attuale sia solido e all'avanguardia, caratterizzato da riunioni settimanali del comitato, supervisione indipendente e pieno coinvolgimento del Consiglio nella decisione finale. L'azienda ha già identificato candidati qualificati ed è aperta ai suggerimenti degli azionisti, mantenendo come priorità una successione efficace.
Sleep Number (SNBR) ha respondido a la carta pública de Stadium Capital Management a los accionistas sobre la sucesión del CEO. La compañía destacó su exhaustivo proceso de búsqueda de CEO, liderado por el Comité de Desarrollo y Compensación de la Dirección con el apoyo de Korn Ferry. A pesar de un amplio compromiso con Stadium, incluyendo la incorporación de dos directores recomendados por Stadium y múltiples reuniones, Stadium hizo una demanda inusual de participación directa en el proceso de sucesión del CEO. La Junta sostiene que su enfoque actual es sólido y de primera categoría, con reuniones semanales del comité, supervisión independiente y total participación de la Junta en la decisión final. La empresa ya ha identificado candidatos calificados y se mantiene abierta a la opinión de los accionistas, priorizando una sucesión efectiva.
Sleep Number (SNBR)는 CEO 승계에 관한 Stadium Capital Management의 주주에 대한 공개 서한에 답변했습니다. 이 회사는 Korn Ferry의 지원을 받아 운영 개발 및 보상 위원회가 주도하는 포괄적인 CEO 검색 프로세스를 강조했습니다. Stadium과의 폭넓은 협력에도 불구하고, Stadium은 CEO 승계 과정에 직접 참여하겠다는 이례적인 요구를 했습니다. 이사회는 현재의 접근 방식이 견고하고 최상급이라고 주장하며, 주간 위원회 회의, 독립적인 감독 및 최종 결정에 대한 전체 이사회의 참여를 특징으로 하고 있습니다. 이 회사는 이미 자격을 갖춘 후보자를 확인했으며, 효과적인 승계를 우선시하면서 주주 의견에 열려 있습니다.
Sleep Number (SNBR) a répondu à la lettre publique de Stadium Capital Management adressée aux actionnaires concernant la succession du CEO. L'entreprise a mis en avant son processus de recherche de CEO complet, dirigé par le Comité de Développement et de Rémunération de la Direction avec le soutien de Korn Ferry. Malgré un large engagement avec Stadium, y compris l'ajout de deux directeurs recommandés par Stadium et plusieurs réunions, Stadium a formulé une demande inhabituelle de participation directe au processus de succession du CEO. Le Conseil maintient que son approche actuelle est solide et de premier ordre, avec des réunions hebdomadaires du comité, une supervision indépendante et une implication totale du Conseil dans la décision finale. L'entreprise a déjà identifié des candidats qualifiés et reste ouverte aux suggestions des actionnaires tout en priorisant une succession efficace.
Sleep Number (SNBR) hat auf den öffentlichen Brief von Stadium Capital Management an die Aktionäre zur Nachfolge des CEO reagiert. Das Unternehmen hob seinen umfassenden Prozess zur CEO-Suche hervor, der vom Management-Entwicklungs- und Vergütungsausschuss mit Unterstützung von Korn Ferry geleitet wird. Trotz umfangreicher Gespräche mit Stadium, einschließlich der Hinzufügung von zwei von Stadium empfohlenen Direktoren und mehreren Treffen, stellte Stadium eine ungewöhnliche Forderung nach direkter Beteiligung am CEO-Nachfolgeprozess. Der Vorstand hält an der Auffassung fest, dass der aktuelle Ansatz robust und erstklassig ist, mit wöchentlichen Ausschusssitzungen, unabhängiger Aufsicht und vollständiger Beteiligung des Vorstands an der endgültigen Entscheidung. Das Unternehmen hat bereits qualifizierte Kandidaten identifiziert und ist offen für die Vorschläge der Aktionäre, wobei eine effektive Nachfolge priorisiert wird.
- Board has implemented comprehensive governance reforms including CEO transition and Board declassification
- Professional CEO search process in place with Korn Ferry, a leading executive search firm
- Qualified candidate pool already identified through methodical search process
- Independent committee oversight with experienced members, including three former public company CEOs
- Tension with major shareholder Stadium Capital Management over CEO succession process
- Potential delays in CEO appointment process due to stakeholder disagreements
- Stadium's withdrawal from scheduled meeting with Committee and Korn Ferry
Insights
The ongoing leadership transition at Sleep Number reveals significant corporate governance dynamics. The company's structured CEO succession process, involving Korn Ferry and an independent committee, follows institutional best practices. However, the tension with Stadium Capital Management, a major shareholder, highlights the delicate balance between shareholder activism and board autonomy.
The board's comprehensive approach includes weekly committee meetings, a nationwide candidate search and involvement of all independent directors. Their previous accommodation of Stadium's suggestions, including adding two Stadium-recommended directors and implementing board declassification, demonstrates receptiveness to shareholder input. Yet, Stadium's unusual demand for direct participation in the CEO selection process crosses traditional governance boundaries.
The situation merits attention as it could impact the company's market perception and potentially affect the caliber of CEO candidates willing to participate in the search process.
The Board of Directors (the “Board”) and leadership team of Sleep Number welcome shareholder input and suggestions. To that end, we have engaged extensively with Stadium and last November added two directors recommended by Stadium to the Board. Over the last 12 months, members of our Board and leadership team have spoken with Stadium on more than a dozen occasions, and Stadium participated in four meetings with the Board’s Capital Allocation and Value Enhancement Committee.
On October 30, 2024, Sleep Number announced a set of comprehensive and thoughtfully considered changes to the Company’s leadership and governance, including a CEO transition and Board refreshment and declassification. These reforms, which were carefully planned, were consistent with nearly all the suggestions we had received from Stadium over the past year.
As we expressed to Stadium at the time, executing an effective CEO succession process and identifying and recruiting the next CEO is the highest priority for the Board. The Board has prepared extensively for this process and is confident in its approach to CEO succession, for several reasons:
- The Board’s Management Development and Compensation Committee (the “Committee”) has been planning for CEO succession for years. Consistent with best practices, the Committee has discussed CEO succession, candidates and process nearly every quarter for many years.
- The Committee is being advised by an experienced, independent executive search firm. The Committee has retained Korn Ferry, one of the world’s leading executive search firms, to assist with the CEO search process. The individual leading the search for Korn Ferry is the co-leader of that firm’s Board and CEO practice.
- The Committee is highly qualified and independent. All six members of the Committee (one of whom was recommended to the Board by Stadium) are fully independent, and each member has experience with CEO succession processes; three members are current or former public company CEOs, and one was a private company CEO. Sleep Number’s CEO is not on the Committee. The Committee’s composition is appropriate, reflecting a diverse range of tenures and areas of functional and industry expertise.
- The search process has been robust and methodical. The Committee has been meeting on a weekly basis now that it is actively recruiting a new CEO and, in between meetings, is evaluating candidates and engaging with Korn Ferry. Consistent with best practice, the Committee did not limit the talent pool Korn Ferry should survey. The Committee has been presented with an initial candidate pool of accomplished leaders from across the country. The Committee, with Korn Ferry’s input, has filtered that list and conducted initial screenings of some candidates, with members of the Committee interviewing such candidates. The initial screening continues even as candidates advance in the process.
- The full Board is involved and will make the final decision. The full Board has been, and will continue to be, involved in the process, approving the CEO profile, reviewing the position specification approved by the Committee and receiving updates as the Committee advances the search. The final decision will be made by the full Board, after each director has the opportunity to interview each of the final candidates.
Given our robust approach, we were surprised when Stadium made the highly unusual demand that it be granted direct participation in the CEO succession process. There is no predicate, in our view, for changing the Board’s best-in-class CEO search process. As noted, our process has been underway for many months and has already identified highly qualified candidates. Resetting the process to accommodate a single shareholder’s desire for direct participation on the Committee may discourage participation by CEO candidates and would likely delay the appointment of a new CEO.
That said, the Committee and Sleep Number’s Board remain interested in Stadium’s perspectives and input. To that end, three independent directors met with Stadium to describe our process and listen to Stadium’s views on the qualities it desires in a new CEO. Further, the Committee invited Stadium to present its views and ask questions to the entire Committee and Korn Ferry last week. Stadium abruptly withdrew its participation less than 24 hours before the meeting was scheduled to take place.
The Board invited the Company’s top 20 shareholders to share their views on CEO succession. The Board appreciates the contributions of those shareholders that have shared their views already and welcomes all stakeholders to provide their perspectives. Despite Stadium’s refusal to present its views to the Committee and Korn Ferry, Sleep Number’s Board and the Committee remain open to Stadium’s input.
The Board reiterates that its highest priority is identifying and recruiting the optimal candidate.
About Sleep Number Corporation
Sleep Number is a wellness technology company. We are guided by our purpose to improve the health and wellbeing of society through higher quality sleep; to date, our innovations have improved nearly 16 million lives. Our wellness technology platform helps solve sleep problems, whether it’s providing individualized temperature control for each sleeper through our Climate360® smart bed or applying our more than 29 billion hours of longitudinal sleep data and expertise to research with global institutions.
Our smart bed ecosystem drives best-in-class engagement through dynamic, adjustable, and effortless sleep with personalized digital sleep and health insights; our millions of Smart Sleepers are loyal brand advocates. And our 3,700 mission-driven team members passionately innovate to drive value creation through our vertically integrated business model, including our exclusive direct-to-consumer selling in nearly 650 stores and online.
To learn more about life-changing, individualized sleep, visit a Sleep Number® store near you, our newsroom and investor relations sites, or SleepNumber.com.
Forward-looking Statements
Statements used in this news release relating to future plans and events such as the statements about the board’s ongoing work to identify and recruit the next CEO are forward-looking statements subject to certain risks and uncertainties which could cause the company’s results to differ materially. The most important risks and uncertainties are described in the company’s filings with the Securities and Exchange Commission, including in Item 1A of the company’s Annual Report on Form 10-K and other periodic reports. Forward-looking statements speak only as of the date they are made, and the company does not undertake any obligation to update any forward-looking statement.
View source version on businesswire.com: https://www.businesswire.com/news/home/20241125229878/en/
Investor Contact: Dave Schwantes; investorrelations@sleepnumber.com
Media Contact: Julie Elepano; julie.elepano@sleepnumber.com
Source: Sleep Number Corporation
FAQ
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