Quality Systems Inc. claimed a small win Thursday in its ongoing proxy fight with a major shareholder.
The Irvine-based medical software maker said Institutional Shareholder Services Inc., an influential shareholder adviser, recommended voting for all eight of management’s director nominees and proposals.
Institutional Shareholder Services, in a release, said it didn’t believe the concerns of Ahmed Hussein, an Egyptian businessman and investor who owns some 18% of Quality, warranted the election of a dissident slate to the board.
Quality’s shareholder meeting is set for Wednesday.
The dispute between Hussein and Sheldon Razin, Quality’s chairman, cofounder and other dominant owner, appears to be over compensation for directors and management.
Razin and his slate, including Chief Executive Louis Silverman, believe compensation has been lean and that corporate governance principles Hussein established upon becoming a Quality director in 1999 are too harsh.
Hussein takes exception with what he calls excessive stock option grants for the board and senior managers, saying it has caused a 7% dilution in Quality’s shares.
The fight comes amid a doubling in Quality’s shares this year. The company has a market value of nearly $900 million.
Hussein became a board member of Quality after Razin asked him to join and help bring the company through a rough period that included shareholder lawsuits that sent the software maker’s price down 90%.
The battle between the two sides has sharpened in recent weeks.
Last week, Hussein filed a proxy statement and explanatory letter detailing his concerns with the Securities and Exchange Commission.
Razin’s influence has eliminated “a truly balanced board,” according to Razin, resulting in a “a significant breakdown in corporate governance.”
Two days later, Razin and Quality’s independent directors blasted back in a federal filing, including saying that Hussein’s proxy “contains numerous material misstatements and omissions.”
Hussein’s “personal agenda,seeking to regain with his colleagues a position to control, disrupt and paralyze the operations of (the board) ,cannot be permitted to jeopardize the great momentum that (Quality) has achieved,” the company said.
