Some disgruntlement emerges in Bottomline shareholder vote

Significant number of shares won’t endorse returning founders to the company’s board

Stockholders holding a significant number of shares in Bottomline Technologies have given the company’s founders a no-confidence vote, even as they returned them to the board of directors. An unusually high percentage of shares also were voted against increasing the number of shares set aside to award top executives of the Portsmouth-based payroll software firm.

The founders, Daniel McGurl and James Loomis, faced no opposition for their board seats, but shareholders withheld a substantial number of votes anyway. Indeed, in McGurl’s case, almost twice as many shares were withheld as were cast in his favor: 22.1 million compared to 11.6 million. Those controlling some 14 million shares withheld their votes for Loomis as well, compared to 19.7 million votes of support.

McGurl and Loomis founded the firm in 1989 and have been on the board ever since. McGurl, now 77, was the company’s first CEO until he retired in 2002 and was chairman of the board until 2007. Loomis, 63, was the executive vice president up to 1996, and a senior executive adviser until 2000.

A third board member – 38-year-old Jennifer Gray, who joined the board last year – received 33 million votes, with only 779,000 shares withheld. Gray, whose day job is as CEO of Portsmouth-based Market Street Talent, an information technology staffing and consulting company, was put on the compensation committee.

Compensation was another issue in contention. Bottomline proposed to amend its stock incentive plan to increase the number of shares available for executive compensation by some 2.4 million shares – or 43 percent – to a total of 7.95 million shares. That measure passed with 21 million shares, but some 12.7 million shares were cast against it. The support for “say on pay” – an advisory vote on the entire executive pay package – was stronger, some 84 percent, with 11 percent against, but that was still more than twice the opposition that arose at last year’s shareholder meeting, and that’s with a slight pay cut.

The three executives’ compensation packages fell just short of $4 million, compared to fiscal 2012, when they were paid more than $5 million. CEO Robert Eberle’s $2.3 million salary is about $700,000 lower than last year, nearly all due to a drop in his stock awards.

The company posted a $14.4 million net loss last fiscal year, or about 41 cents a share, even though revenues were up and the company had enough cash to spend $109 million to buy two European firms in August.

Eberle, in response to an NHBR inquiry said that “shareholders are very supportive of Bottomline, its management, the strategic direction of the company and the strong financial results we have recorded.” He added that “there was not a single negative question, comment or person at this year’s shareholder meeting.”

He did offer as an explanation that some investors are voting against former executives as board members when the company claims them as independent members.

And he added that the compensation amendment would have gotten more votes if fewer shares were asked to be set aside for executives.

“None of the votes cast against were against the plan per se, just the amount of additional shares being put in the plan,” he said.

T. Rowe Price Associates, Bottomline’s largest shareholder with a 10.4 percent stake in the company, said they won’t reveal how they voted or even consider discussing why until the firm is required to disclose such information in August.

Other major investors could not be reached by deadline.