Quantum is to change its corporate governance to settle a lawsuit that alleged breaches of fiduciary duty.
The lawsuit was instituted by plaintiff Dennis Palkon and the defendants were ex-CFO Fuad Ahmad, ex-CEO Jon Gacek, ex-CEO Adalio Sanchez, and former board members Raghavendra Rau, Alex Pinchev, Clifford Press, Marc Rothman, and activist investor and also board member Eric Singer of VIEX Capital Advisors.
The Palkon Action asserted claims against the individual defendants “for breach of fiduciary duty, abuse of control, gross mismanagement, and unjust enrichment”, in 2017-2018 when scale-out storage revenues rose and Quantum claimed it had won a significant deal with a large cloud provider worth an initial $20 million. This is the subject of separate and ongoing litigation.
The lawsuit contends that, as a result of the alleged wrongdoing “Quantum’s stock price traded at artificially inflated prices…and that when the truth about the false and misleading statements was revealed to the public on or about February 8, 2018…Quantum’s stock price suffered a market decline, causing Quantum to sustain significant damages, including losses to its market capitalisation and harm to its reputation and goodwill.”
The settlement stipulations are:
- Board independence reforms, including appointment of Lead Independent Director, director term
- limits, meetings in executive session, stockholder meetings, and Board diversity,
- Creation and maintenance of a Disclosure and Controls Committee,
- Audit Committee reforms,
- Adoption of a Compensation Clawback Policy to address and remedy any future misconduct by the Company’s CEO, CFO, or any other officer or director,
- Hiring and maintenance of a Compliance Officer,
- Director training, continuing education, evaluation and reporting, and annual self-assessments,
- Adoption of a Confidential Whistleblower Program,
- Code of Business and Ethics reforms.
Quantum appears to have escaped lightly. It has not conceded any of the plaintiff’s claims and will pay $800,000 for the expenses of his legal team. Palkon receives no money. A settlement hearing will be held later this year and shareholders can file any objections to the settlement at the hearing.