AutoNation shareholders reject proposal on chairman's independence

Editor's note: An earlier version of this story misstated when the shareholder vote would take place.

A longtime AutoNation Inc. shareholder’s proposal that would require the company's chairman to be an independent member of the board was voted down at the company’s annual meeting Thursday.

The shareholder, John Chevedden, also questioned the independence of the AutoNation's lead director.

An overwhelming majority – 95 percent – of AutoNation’s shareholders voted against the proposal, according to Marc Cannon, chief marketing officer.

Chevedden, a shareholder since 2000, requested in a proposal filed Tuesday that the AutoNation board adopt a policy that the chairman be an independent member of the board. The board said in a response to this proposal that it has already committed to having an independent chairman when current Executive Chairman Mike Jackson leaves the company.

Jackson, 70, was CEO and chairman for the better part of two decades before transitioning to executive chairman in March. His contract with the company expires in 2021, and his future with AutoNation beyond 2021 is undecided, the company said last year.

This was at least the fifth proposal Chevedden has made related to having an independent chairman of the board at AutoNation, he told Automotive News. Chevedden is known for being a prominent shareholder activist who frequently files such proposals with many companies in which he holds stock.

AutoNation's board opposed Chevedden's proposal and recommended that shareholders vote against it because the company already adopted a policy in February regarding an independent chairman of the board. When Jackson leaves the board, the chairman should be an independent director, the board wrote in its response to the proposal.

The board will continue to have a lead independent director until an independent chairman of the board is elected. "The Board believes that the adopted policy suitably addresses the concerns raised by the proposal in a practicable and enforceable manner, rendering the policy sought by the proposal unnecessary," the response said.

Chevedden's four other proposals related to having an independent AutoNation chairman failed. But Chevedden's latest effort differed from previous proposals because it directly addresses two recent board and executive changes at the company.

Chevedden wrote in his proposal that "It is important to adopt this proposal because this proposal is in favor of not waiting until 2021 to have an independent board chairman."

The company could have already promised the chairman position to Carl Liebert, an outsider who assumed Jackson's CEO position in March, when Jackson's term expires, Chevedden wrote in the proposal.

When Liebert's hiring was announced in February, Jackson touted the diverse perspective Liebert would bring to AutoNation with his background in supply chain management and digital platforms. Liebert previously had posts at USAA, General Electric, Home Depot and Circuit City.

Chevedden said AutoNation's board would be making a mistake if it reverses its independent chairman policy and someday appoints Liebert as chairman and CEO.

"We need independent oversight. We need someone that can focus more on the strategic direction rather than executing day-to-day tactics of the company," Chevedden said. "It's a sounding board to make sure things are well thought out."

Chevedden's proposal also addresses the recent turnover in AutoNation's lead independent director role.

Rick Burdick was appointed to that role after AutoNation's previous lead independent director, Michael Larson, abruptly resigned from the board in December. Larson is chief investment officer for Bill Gates, co-founder of Microsoft. Gates, through various investment entities, became AutoNation's largest shareholder in early 2016.

At the time he resigned, Larson was leading the retailer's efforts to find a CEO successor to Jackson.

In his proposal, Chevedden called into question whether Burdick, a board member for AutoNation and its predecessor company for 28 years, would serve as a "true" independent lead director.

"He's been through everything and might be not receptive to new ideas," Chevedden told Automotive News. "You don't expect someone [with a long tenure] to bring in new ideas or to make a big change from the past."