Farmer Brothers Company Proxy Contest: A Corporate Governance Case Study

In 2019, Farmer Brothers, a coffee and tea producer and distributor, was facing its second challenge to its board of directors from dissident founding family shareholders, who no longer held a controlling interest in the firm. Farmer Brothers defeated its first proxy contest in 2016, with shareholders and a major shareholder advising firm, International Shareholder Services, endorsing management. Since then, the performance of the company had declined, and its CEO replaced in May 2019. A new set of dissenting shareholders included the granddaughter of founder Roy Farmer and a former board of director member. The dissident shareholders were accusing Farmer Brothers’ management of failure to create firm value and of poor financial and operating performance from 2017 to 2019. Farmer Brothers shareholders needed to decide whether to support Farmer Brothers management’s slate of directors or director candidates promoted by dissident shareholders. This case study combines financial analysis (ratio and financial statement analysis, stock price performance, and firm valuation) with a close look at corporate governance.