Glass Lewis backs Bergeron’s five nominees to Ethan Allen board ahead of November vote
Key Facts
Glass Lewis recommended that Ethan Allen shareholders vote for the five nominees put forward by investor Doug Bergeron, bolstering his campaign ahead of the company’s annual meeting scheduled for November 4, 2026. The recommendation does not mean the board has changed; that decision rests with shareholders in the election. Bergeron and DGB Investments own a 5.2% stake in the company, whose market value Reuters put at about $515 million. Bergeron’s slate sought to replace all five board members, including CEO Farooq Kathwari. Glass Lewis described DGB’s strategic and financial agenda as “credible and reasonably strong.”
Glass Lewis cited what it described as limited accountability, operational deterioration and a failure to build shareholder value. It said the company was lagging in the short, medium and long term, and that management and the board had overseen an “almost continuous structural decline.” It also viewed the company’s capital program as appearing riskier. The firm concluded that Bergeron’s slate was better positioned to address these issues, a separate assessment from its description of the company’s trajectory. The slate includes, according to Reuters, candidates with experience in the home furnishings sector, operational turnarounds, luxury retail and digital strategy.
The recommendation comes amid weak operating performance in fiscal 2026, when operating income under GAAP fell 27.4% to $45.016 million, compared with $61.988 million in the prior fiscal year. The company attributed the annual sales decline to lower contract sales and fewer units delivered. It also said a decline in incoming orders reduced the available backlog. In the market, Ethan Allen shares lost more than a quarter of their value in the 12 months ended October 23 and closed at $20.45 that day, according to Reuters. That performance puts results and operations at the center of the clash between the activist shareholder and the board.
By contrast, Ethan Allen cited financial indicators in its shareholder filing that it said support the company’s model. It said its consolidated gross margin exceeded 59% for five consecutive fiscal years and that its balance sheet was debt-free. The company also said its five-year total shareholder return was 49.1% through September 21, 2026, including reinvested distributions, while the peer-group median recorded a loss of 42.7% over the same period. Cash and investments totaled $187.5 million on June 30, 2026, compared with $196.2 million a year earlier, and the company had no outstanding debt on that date. The activist is therefore focusing on operational deterioration and the share price, while the company points to its margins, long-term return and financial position.
Shareholder voting recommendations are split among proxy advisers ahead of the meeting. Glass Lewis is the second firm to recommend backing Bergeron’s five nominees, following Egan-Jones’ recommendation the previous week. ISS had not published its report by the date of Reuters’ report. The annual meeting is scheduled to be held virtually on November 4 at 11:00 a.m. Eastern time. If DGB’s nominees are elected, their terms will last one year, ending at the 2027 annual meeting. Ethan Allen did not immediately respond to Reuters’ request for comment.
The dispute is also tied to a leadership transition at the company. Ethan Allen said it had begun searching for a successor to Kathwari and hired an executive search firm, while considering candidates from inside and outside the company. It pledged to announce the next CEO no later than June 30, 2027, when Kathwari’s current contract expires. Kathwari will continue to lead the company during the search process, then remain a non-executive board member until the 2027 annual meeting. Bergeron believes his slate can restore profitable growth and potentially triple shareholder value within three years; that is a goal put forward by the investor, not a guaranteed outcome. Shareholders will vote on board members on November 4, while the succession process remains open until the date set by the company.