Bruce Berkowitz and Charles M. Fernandez of Fairholme Capital Management LLC, St. Joe Co.’s biggest shareholder, resigned from the developer’s board because of disagreements over its nominating and governance process.
Berkowitz and Fernandez also withdrew their names from consideration for election at St. Joe’s next annual meeting, according to a regulatory filing today. They were named directors of the Watersound, Florida-based company in December.
“It was clear to us we weren’t going to be able to achieve anything further as directors,” Berkowitz said today in a telephone interview from Miami. “The only way we can be effective is as shareholders.”
The resignation comes less than a week after St. Joe said it hired Morgan Stanley to explore options to boost shareholder value, including a merger or sale. Fairholme, based in Miami, owns about 29 percent of the developer and last week proposed former Florida Governor Charlie Crist as a director.
The Fairholme executives said they would only be part of a board “where the majority of the directors are committed to shareholder value, pay for performance and effective corporate governance,” according to an e-mail to the board included in the filing. “We have concluded that the current board is not in a position to propose such a slate of directors.”
Shareholders’ Best Interest
The resignations “are not in the best interest of all St. Joe shareholders,” the company said in a statement today. Berkowitz and Fernandez “substantially agreed” with the business plan and approved the exploration of alternatives, according to the statement.
“While there can be no assurance that any changes or transaction will result from this process, we believe it is an important step for the company,” the developer said. “The St. Joe board has always been committed to strong corporate governance, to protecting shareholders’ interests and to creating superior results for the long term.”
The resignations were announced while St. Joe’s governance and nominating committee was reviewing Fairholme’s proposed nominees for the board, the company said.
St. Joe, northern Florida’s largest private landholder, has been criticized by hedge fund manager David Einhorn, who has said the company needs to take “substantial” asset-impairment charges. Einhorn declined to comment for this story.
In October, Einhorn said he had taken a short position in the stock. Short sellers sell borrowed shares, hoping to profit by repurchasing them later at a lower price and returning them to the holder.
“I still believe St. Joe has tremendous value to unlock, but you have to have the right people to unlock it,” Berkowitz said. “I do not regret our St. Joe investment. I’m still quite optimistic.”
St. Joe, which reports fourth-quarter earnings on Feb. 24, has lost money for 10 consecutive quarters.
“You’ve got to stop the bleeding,” Berkowitz said, citing executive compensation costs.
William Britton Greene, St. Joe’s chief executive officer, had total compensation of $2.8 million in 2009, according to data compiled by Bloomberg. That year, the company reported a loss of $130 million on revenue of $138.3 million.
As a shareholder, Berkowitz has the right to nominate alternative board candidates in advance of St. Joe’s annual meeting, as long as he agrees to pay the cost of publicizing the slate, said Nell Minow, editor for GovernanceMetrics International, a corporate governance research firm in New York.
“He could also go to the annual meeting and nominate someone,” she said in a telephone interview.
St. Joe’s annual meeting is scheduled for May 17 in Santa Rosa Beach, Florida.
St. Joe fell 2.4 percent to $26.06 as of 4:15 p.m. in New York Stock Exchange composite trading. The stock has gained 19 percent this year, compared with a 1.4 percent decline in the 36-member Bloomberg Americas Real Estate Index.