EXETER, N.H. -- Tyco International Ltd., bowing to pressure from investors and regulators, rejected yesterday a proposal to allow two of the nine board members who served with former Chairman L. Dennis Kozlowski to remain.
The proposal, led by directors Wendy E. Lane and Richard S. Bodman, sought to keep Lord Michael Ashcroft and Bodman, partly because of their length of service and ability to provide continuity.
The board voted unanimously against the proposal after Legg Mason Inc.'s Bill Miller and large shareholders criticized the plan.
Edward D. Breen Jr., the company's new chief executive officer, will choose two of the departing directors to stay with Tyco as consultants, the company said in a statement.
'New slate'
"Today's decision confirms the board's commitment to select a new slate of independent directors who will bring a wide range of perspectives to Tyco," Breen said. "I believe the board is acting in the best interest of the company and its shareholders."
Mark Connolly, director of securities regulation for New Hampshire, said, "The board did the right thing by giving Ed Breen the opportunity to move forward with a new board. I very much endorse it."
New Hampshire agreed last month to settle its investigation into misconduct by former Tyco management.
But Thursday, Connolly told Breen in a letter that retaining the two Kozlowski-era board members would contradict the spirit of the $5 million settlement over corporate governing reforms at the troubled company, which is based in Bermuda but run from Exeter, N.H.
Miller, whose funds hold more than 50 million Tyco shares, and Omega Advisors Inc. Chairman Leon Cooperman were two of the stockholders pushing Breen for total board turnover.
Tyco also nominated retired Navy Adm. Dennis C. Blair to the board yesterday.
Tyco shares fell 2 cents to close at $15.48 on the New York Stock Exchange yesterday. They have dropped 74 percent this year as investors questioned Tyco's accounting, liquidity and strategy.
Aim was continuity
The proposal to keep Ashcroft and Bodman was primarily about continuity, Lane said yesterday.
"The consultant solution does seem to nicely satisfy that issue," said James G. Bitter, an analyst at Wilmington Trust Corp., which holds Tyco among the $25 billion it manages.
Kozlowski and ex-Chief Financial Officer Mark H. Swartz were indicted in New York recently on charges of stealing $170 million in compensation from Tyco and $430 million through stock fraud. Both pleaded not guilty.
Kozlowski, who resigned in June, is also being sued by Tyco. Swartz, who left in August, is in arbitration.