Blockbuster last week urged its shareholders against granting Greg Meyer a seat on the board of directors. Meyer, a large shareholder in the company himself and the former CEO of kiosk company DVDXpress, filed a Blockbuster restructuring plan Thursday that would dramatically reinvent the struggling video-rental giant. Heads of Blockbuster have refused to seat Meyer on the board, and have called his plan inadequate. We have already spoken with Meyer about Blockbuster's brash management style, and his attempt to gain a seat on the board through a hostile proxy contest. Now, we speak with Blockbuster CEO Jim Keyes, who gives his side of the story in part I of our two-part interview.
Fast Company: Greg Meyer recently said that, "By spending company money to fight an unnecessary proxy contest with the sole aim of keeping a qualified, independent director candidate off the Board, [you are] definitely exercising poor business judgment and acting in a way that is damaging to the company." Could you tell me your take on the Greg Meyer situation? Why have you chosen not to seat him voluntarily?
CEO Jim Keyes: Let me give you some background. Mr. Meyer approached us several months ago, and requested a seat on the board. I guess we were flattered by his interest in serving on the board. We were in the middle of a board search, and we shared an opportunity to include him in the mix.
He has some relevant experience in the industry, but we were really looking for some specific things. We had a director of our audit committee who would not stand for reelection, so a major priority for us was that the candidate must have financial expertise. There are even criteria that public companies have to adhere to on the NYSE regarding this. We did a search and we found some excellent candidates. Mr. Meyer did not satisfy our requirements. So thank you very much, Mr. Meyer, but we've selected a candidate and moved on.
So even though he was the CEO of DVDXpress, he wasn't qualified?
We've eliminated two board seats, which created substantial savings in the range of $200,000 to $400,000 from stock, director fees, travel, and other costs. As I said, we wanted someone with solid financial expertise, first and foremost. It's unfortunate that Mr. Meyer wouldn't work with us as a director candidate and prove his merits over time. Mr. Meyer also said he wouldn't do a proxy contest for the seat, but he apparently changed his mind when he wasn't selected. So be it, that is his privilege.
But we've saved far more from eliminating those two board seats than it'd cost to defend a proxy battle against Mr. Meyer.
Eliminating the board seats was worth more than seating Mr. Meyer? Wasn't his expertise more valuable to the company than the board seats?
We had a total of three seats available, and we eliminated two. You don't want an even number of directors.
Listen, don't look for something in this — there is nothing. It's a straight-up process. I'm not saying he wasn't qualified for the board. He went through the normal process. I understand his desire, but frankly, he wasn't the most qualified candidate.
Meyer also told me that you could learn from Netflix, which has "a very smart, focused, and visionary management team—
—you think I don't agree?
—he also said that you must be "more realistic about the lingering negative perceptions that plague the Blockbuster brand and exercise more leadership to address these issues head on."
How do I do that without appearing brash? The reality of the situation is that Blockbuster and Netflix take very different segments. They are experts at search and availability of long-tail content. Our core is new releases. Their business is 80% long-tail, 20% new. We are the absolute inverse. So we actually serve very different customers.
Look, I know my friend Mr. Meyer thinks we're sitting on our hands, but we think we've developed a better mousetrap.
Part II of our interview with CEO Jim Keyes, in which he candidly discusses Netflix, Nintendo, and Blockbuster's chances of success, will appear tomorrow.