Providence Service's board nominees supported by proxy advisory firms

By Lisa Kerner

Charlotte, N.C., June 1 - Glass, Lewis & Co. and Proxy Governance, Inc. recommended that Providence Service Corp. shareholders vote for the company's nominees for the board of directors - Fletcher Jay McCusker, the company's chairman and chief executive officer, and Kristi L. Meints, chairperson of the board's audit committee - at Providence's annual meeting on June 15, Providence announced on Monday.

According to Providence, Glass Lewis questioned the experience and intentions of the Avalon Group and its nominees.

Glass Lewis does not believe "Avalon Group's nominees are the right individuals to effect change at Providence given the affiliation of the Avalon Group's nominees with Avalon Correctional Services [Inc.] and its chief executive officer, sole director and controlling stockholder, Donald E. Smith," a Providence news release said.

Providence said the Glass Lewis report noted that if Avalon Group's November 2008 proposal had been accepted, Avalon Group would have boosted its voting and ownership interest in Providence to over 33% and secured a greater than 42% annual dividend yield.

The proposal was rejected by Providence's board.

McCusker said Providence was "gratified that the Glass Lewis report supports the decision of our board to reject the Avalon Group's one-sided, self-serving transaction proposal."

Proxy Governance support

"We recognize that the board did ultimately follow a prudent and well-thought-out response to the economic risks the company faced, and appears to have pulled the company back from the brink," the Proxy Governance report said, according to Providence.

"We therefore believe that shareholders would best be served by the re-election of the better qualified and experienced management nominees," the proxy advisory firm said.

Proxy Governance also believes that Providence's "executive compensation appears reasonable given its financial performance relative to peers," according to Providence.

As previously reported, Avalon Group wants Providence shareholders to elect Michael C. Bradley Jr. and retired U.S. Navy captain Brian T. Costello to Providence's board.

Providence is a Tucson-based provider of home- and community-based social services to government-sponsored clients under programs such as welfare, juvenile justice, Medicaid and corrections.

Oklahoma City-based Avalon owns and operates private community correctional facilities and correctional programming.

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