The chairman and chief executive of Darden Restaurants, Clarence Otis Jr., said on Monday that he planned to step down, months after waging an intense fight with activist hedge funds opposed to his turnaround plans for the embattled company.
Mr. Otis said he would step down as chief executive when the board chooses his successor, or by year-end. He will serve out his remaining term as director but will not stand for re-election, and will be succeeded as chairman by Charles A. Ledsinger Jr., the lead independent director.
It is a humble end to the nearly decade-long tenure of Mr. Otis as chief executive, a period of expansion and then decline. The last year has been increasingly contentious, with volleys of words between Darden’s management and two activist funds that have called for a breakup of the restaurant chain to improve shareholder value.
The moves came on the day that Darden completed the sale of the Red Lobster, the seafood chain that gave rise to the restaurant’s empire, in a transaction that was vigorously opposed by the activist investors. The bigger of the two hedge funds, Starboard Value, has kicked off a proxy contest aimed at unseating the company’s entire board. The smaller of the two, the Barington Capital Group, has supported the boardroom fight.
In an effort to end the hostilities with Starboard – a fight that many investors and analysts say Darden cannot win – the company announced separately on Monday that it planned to nominate just nine of 12 directors to its board. That ensures that the hedge fund can claim three board seats.
“With today’s announcement, the board’s slate of directors would provide both continuity of experience and expertise in the midst of our turnaround efforts as well as additional new directors proposed by Starboard,” Mr. Ledsinger said in a statement. “We are committed to taking all appropriate steps to serve the interests of Darden and all Darden shareholders.”
But Darden cautioned that while it had held settlement discussions with the shareholder, it had yet to reach an agreement.
Starboard showed little sign of relenting on Monday, as it continued focus on Mr. Otis and what it contends was a foolhardy decision to sell Red Lobster.
“It is a shame for all Darden shareholders that this change happened only after the board sanctioned the destruction of a billion dollars in shareholder value by approving the Red Lobster sale against the vehement objections of its shareholders,” Jeffrey C. Smith, Starboard’s chief executive, said in a statement.
He added that Darden’s director offering was largely cosmetic, with the vacancies arising only because some board members were retiring anyway.
“It is clear that such token board change is not sufficient given the depth of the value destruction and the abominable corporate governance that this board has overseen,” Mr. Smith added.
Darden is being advised by Goldman Sachs, Morgan Stanley and the law firm Wachtell, Lipton, Rosen & Katz.