JUNE 10, 2010 10:04 a.m. (1)
Denny’s Corp. replaced Nelson Marchioli as president and chief executive officer less than three weeks after his contract apparently renewed for a year and after his leadership was derided by dissident shareholders in a proxy battle.
A spokesman for the company would not say whether Marchioli, who had led Denny’s since 2001, resigned voluntarily or was forced out. He is the third high-ranking executive to leave the company since December.
Board Chair Debra Smithart-Oglesby, 55, who joined the board in 2003, was named interim CEO until a permanent CEO is hired. She is president of O/S Partners, a private investment firm.
In its announcement of the change of leadership, the company provided no details beyond Smithart-Oglesby’s statement that the directors “have been planning for a transition in leadership” as Denny’s nears completion of transition from company-owned to franchise-owned restaurants.
Marchioli’s departure came on the heels of the board’s May 19 victory in a proxy battle with dissident shareholders who tried to unseat Marchioli, Smithart-Oglesby and Robert Marks as directors.
The company spokesman, Michael Fox of ICR, a Connecticut-based public relations firm, said the decision to replace Marchioli was “not an abrupt or a reactionary action.” He said more information will be available when the company files a declaration with the Securities and Exchange Commission.
“At this point, we are just focused on the appointment of an interim CEO and on moving forward,” he said.
The change in leadership was effective with the date of the June 8 announcement, he said.
Under his employment contract, as filed with the SEC, Marchioli’s job would have renewed for another year on May 20 unless the company or Marchioli gave 90-day notice of intent not to extend it for another year.
Without the extension, Marchioli’s employment would have ended after May 19, the date of Denny’s annual shareholder meeting in Spartanburg. Neither Marchioli nor Smithart-Oglesby gave any indication of a forthcoming change at that meeting.
One of the principals of the Committee to Enhance Denny’s, the group that sought unsuccessfully to replace Marchioli, Smithart-Oglesby and Marks, called Marchioli’s departure a victory.
"We're glad he's gone," David Markula of Oak Street Capital Management told the AP
In weeks of exchanges in the proxy fight, the dissidents criticized Marchioli’s leadership, as well as that of the board, and the company just as vigorously defended him and the board.
Marchioli’s position as a director was not immediately addressed by the company. Having been re-elected by shareholders to another term, he cannot be arbitrarily removed.
No details were available of a financial settlement, if any, beyond what Marchioli is entitled under his contract.
According to the company’s 2010 proxy statement to shareholders, within five days after termination without cause, Marchioli was entitled to an estimated cash severance payment of $3.1 million, plus health benefits and stock calculations worth about $500,000.
Marchioli received $2.1 million in total compensation in 2009, which included $780,000 as base salary, $355,968 in stock awards, $337,036 in options, $585,000 in cash incentives and $54,150 in other benefits.
Marchioli is the third and highest ranking executive to leave the company in the last six months. Janis S. Emplit resigned as chief operating officer Dec. 23, and Mark Chmiel resigned as chief marketing officer Dec. 30. Emplit received $1.6 million and Chmiel got $436,244 in severance payments.
The company said Smithart-Oglesby is leading a team “to provide organizational focus on the company’s top priorities during this transition period, with particular emphasis on driving sales and guest counts and ensuring operational excellence across the system.”
In addition to Smithart-Oglesby, the team consists of Mark Wolfinger, chief financial officer; Bill Cox, a large Denny’s franchisee of 16 years, and Bob Langford, another large franchisee. Cox and Langford have been in the restaurant business for 30 years, the company said.
The company said Cox will support operations until a COO is hired, and Langford will continue to support marketing until that job is filled. The search for replacements for those vacant positions “is in an advanced stage,” the company said.
In a separate statement, W. Craig Barber, chairman of the Denny’s Franchisee Association board of directors, said the board is “fully supportive of the leadership transition at Denny’s and is confident in the transitional leadership team to accelerate the company’s progress on key initiatives.”
Barber thanked Marchioli “for his passionate leadership and commitment” to Denny’s, particularly for his “effort to transform Denny’s to a franchise-oriented model.”
He said Smithart-Oglesby would be an “excellent” interim CEO who brings “unique perspective to this critical juncture for our brand.”