Stockholders thwart IRE coup attempt Management's picks for board easily win over Bronson's slate

CEO criticizes challenge

The 'major distraction' hasn't helped company, the victor declares

Encryption technology

July 11, 1998|By Sean Somerville | Sean Somerville,SUN STAFF

With a hint of tension hanging in the air, Information Resource Engineering Inc. investors yesterday rejected a shareholder's attempt to oust the company's board and install his own slate of candidates.

By a margin of approximately 3-to-1, shareholders elected Anthony A. Caputo, the chairman and chief executive officer, and four other management nominees -- three of them current directors -- to one-year terms on the board. About 80 percent of the 5.5 million shares were voted, Caputo said.

The election thwarted an overthrow attempt by shareholder Steven N. Bronson.

Bronson owns 150,000 shares, a 2.75 percent stake, in the White Marsh-based company, which designs, makes and markets computer network security systems using encryption technology. Board members own about 1.2 million shares, more than 20 percent.

After the results were announced, Caputo called the challenge "an exercise in democracy" that also served as a "major distraction."

"It caused many of our customers to ask whether we were going to be around," he said. "That doesn't help any of us."

Caputo also called on shareholders of the company to try to come together. "We voted, we made our choices," he said. Now, he added, it's time to get "back to the business of growing shareholder value."

Bronson, the 32-year-old president of a Miami, Fla.-based brokerage, said he had expected the defeat, especially in light of the board's ownership of about 20 percent of the company's shares.

"We would love to try to come together," he said. "But business is business and the company needs to perform."

Bronson said it was the company's dismal financial performance that drove him to stage a coup attempt against IRE. In proxy materials, Bronson said he had helped IRE raise $7.8 million, only to see the company suffer from a range of problems.

He said the company's woes included the loss of 70 percent of its book value; increasing losses, from $69,000 in 1993 to $3.6 million last year; and Caputo's pay, which last year included a $250,000 salary and an $82,500 bonus.

Yesterday, at a company annual meeting attended by about 175 people, Bronson said from his seat in about the 10th row that shareholders should send a message by voting for his slate. "I put together a board of diversified, savvy business professionals to change the direction of the company," Bronson told shareholders.

James S. Cassel, 42, an executive vice president at Bronson's brokerage and a nominee on Bronson's slate, seconded the nomination of the alternative slate by reading a letter to Caputo ,, from Richard L. Merritt, a shareholder.

"Considering I bought IRE in the high $20s and have held on for a long time, hoping the present management, including you Mr. Caputo, could turn things around, I am just completely out of confidence and patience," Merritt wrote. "Shareholder value is performance-driven; if you can't get the job done, step aside and quit belly-aching and turn over the reins."

Citing the board's ownership of about 1.2 million shares, Caputo said, "No one cares more about shareholder value." Answering a shareholder question about his compensation, Caputo said his pay has been set responsibly. Caputo, who serves on the board's three-member compensation committee, said he does not participate in discussions about his own salary.

Ira A. Hunt Jr., a board member who serves on the committee, also defended Caputo's compensation. He said it was based on how comparable companies are compensating their chief executives. Hunt also said Caputo was denied the maximum bonus -- 100 percent of his salary -- because of the lack of profits.

Caputo told shareholders that sales have risen more than 600 percent over the past four years. He also said the company was on a trajectory of increasing sales and declining losses. But he declined to say when the company expects to turn a profit.

Pub Date: 7/11/98

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