NextGen Founder Razin Pushes for Board Seats to Up Performance
(Bloomberg) -- The founder of NextGen Healthcare Inc. has nominated four new directors to the company’s board in an effort that he says is aimed at improving its poor performance under the leadership of chairman, Jeffrey Margolis.
Sheldon Razin, who currently sits on the board, and fellow director Lance Rosenzweig sent a letter Thursday to the company’s board saying they would also seek re-election to what is expected to be a nine-member board.
The two, along with their nominees, said they owned a combined 15.2% stake. They said they had no desire to obtain boardroom control, or perpetually serve as directors. The move was aimed at installing a new generation of highly qualified directors so the business can thrive after they depart.
“One of our primary goals has always been to leave the company with a foundation for sustained success and long-term value creation,” they said in the letter Thursday, a copy of which was reviewed by Bloomberg News. “We have no confidence that a Margolis-led board will be able to put the company on the right path towards operational excellence with appropriate oversight and accountability.”
The pair accused Margolis and his allies on the board of running an “imperial boardroom culture” that has effectively taken control of the board. Despite the company’s “dramatic underperformance,” Razin and Rosenzweig said Margolis consistently dismissed divergent viewpoints and instead focused on “tightening his grip over corporate decision making.”
The investors said they have tried to build bridges with their fellow directors, including Margolis and his allies, in recent months. “Regrettably, it has become clear to us that most of the board is unwilling to take the steps that we feel are needed to reverse NextGen Healthcare’s deteriorating margins, poor hiring and operational practices, and wasteful capital allocation policy,” the pair said.
A representative for NextGen wasn’t immediately available for comment.
Shares in NextGen, which develops and markets health-care information systems, have fallen about 18% this year. It had a market value of about $1 billon Thursday.
Razin and Rosenzweig said they were particularly concerned about the board’s decision to strike an executive leadership committee in June after NextGen’s Chief Executive Officer Rusty Franz left the company. They argued that the committee was an “insufficient substitute” for identifying an interim or permanent CEO, and appeared to the be result of poor succession planning and their recommendations get a plan in place.
Earlier this week, NextGen announced it had appointed two new directors to the board, and that current director James Malone would also retire. Razin and Rosenzweig were also to be included on its slate of nine-directors up for nomination at the company’s annual general meeting slated for Oct. 13.
Razin and Rosenzweig said the appointment of the new directors appeared to be a “reactionary and self-serving attempt” to further concentrate control.”
Their nominees include Ruby Sharma, Julie Schoenfeld, Ramon Gregory, and Kenneth Fearn.
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