Thursday, October 05, 2006

XM Board

October 4, 2006

Today XM Satellite Radio filed an 8K announcing that another Board Member has resigned his post on the Board of Directors.

This filing brought about an interesting situation that got me thinking about a few things. In this piece I am going to pose some questions that I am unsure of the answer to, and would welcome any comments or opinions.

According to the 8K, XM is now out of compliance with NASDAQ rules regarding Boards. The 8K filed today states, ".... The NASDAQ Stock Market, Inc. Has notified us that our current Board composition is not in compliance with NASDAQ Rule 4350(c)(1) due to our board of directors no longer having a majority of independent directors as defined by NASDAQ Rule 4200(a)(15). We expect to have a Board composed of a majority of independent directors no later than our next annual meeting, as contemplated by applicable NASDAQ rules."

Now, it is common knowledge that a Board of Directors has a responsibility to shareholders. This is why NASDAQ requires that a Board consist of a majority of "independent" members. In theory, the independent nature of the majority would not simply "tow the company line".

In this piece, I am not accusing anyone of anything unethical, or illegal. I am simply posing some questions that may well be on the minds of others, or at least should be given some news surrounding satellite radio.

That being said, here are my questions:

1. Can the Board of Directors, as currently constituted, make decisions upon the direction the company takes with regards to a buyout or merger? Whether or not the Board agreed to it is not material. The question is whether they can make such decisions under NASDAQ rules?

2. Does the current status of the Board of Directors effectively remove XM Satellite Radio from the merger or acquisition market?

3. Could legal implications arise from any decision made by the Board of Directors during this time of non-compliance?

4. Can the Board function on matters that may be perceived as negative for management members of the Board, but be in the best interest of shareholders?

5. The top 10 shareholders in XM account for over 50% of the stock. Could one or more of these players step in and "demand' either a seat on the Board, or a vote to get the Board into compliance as soon possible?

6. Would the current make-up of the Board actually make a merger or acquisition easier?

As shareholders, if you are confident in management, then this may not seem to be a big deal. However, if you are not confident in management, this scenario could cause worry, as management could effectively run things in their own manner without the theoretical check and balance that a compliant Board of Directors has.

Hopefully, some SSG readers will offer input on all of this, and we will of course post answers to this in follow-up.

10/05/2006 12:19:00 AM

SSG Has Merged. You Can Read All Of The Latest SSG Content By Clicking Here


Post a Comment

SSG is not a Financial Advisor. Read Disclosure: HERE


Sirius Radio TSS-Radio Blog Sirius Answers Credit card merchant account


Search by Label


Logo Design:
Jeremy Sprout

Designed by
miru designs

Powered by