Activists want this company’s entire board gone; Big investors are agreeing

Activists want this company’s entire board to go, and in a show of distrust in the entire corporate governance apparatus, big proxy firms are starting to agree.  

Activist investors always want to see a change in how a company is governed. For whatever reason, depending on the individual circumstances, they believe it’s the shot in the arm the company needs to get back on the right track. 

However, it’s rare for activists to want an entire board gone. Even rarer is the idea that big proxy firms would entirely agree with them. 

Yet that’s exactly what’s happening with Ethan Allen, a US-based furniture and interior design company. 

Its 5-person board is under serious threat because activist investor Doug Bergeron feels they should all be replaced, including the long-time Chair, President and CEO Farooq Kathwari. What’s more, proxy advisor firms Glass Lewis and Egan-Jones Proxy Services have issued reports in favour of Bergeron’s proposal ahead of a shareholder vote on 4th November 2026. 

While there are two sides to any standoff like this, such raw appetite for an entire board to be replaced is a massive red flag that key stakeholders simply don’t have confidence in the company’s current strategy anymore.

Ethan Allen is an iconic American brand known for its rustic furniture and interior design services. It’s just under a century old and has gained a reputation for luxury during its years of operation, even decorating the houses of multiple US diplomats. 

Farooq Kathwar (82) has held the dual role of CEO and Chair since 1989, and oversees a board composed of 4 others. All of them now look like they are in danger of losing their jobs.

The same reason activists target any board: they don’t think the company is doing well. 

Bergeron, alongside the proxy firms, is centring their criticism around the following concerns:

• In the 12 months to October 2026, Ethan Allen shares have lost more than a quarter of their value. Over the last ten years, the stock is down roughly 31%. Meanwhile, huge chunks of shareholder return over both five- and ten-year periods have been fuelled by dividend distributions, rather than earnings or equity growth. Ultimately, there is concern that, while the dividends keep occurring, there are no meaningful earnings to back them up. 
• The current board has chosen to schedule the release of its first-quarter fiscal 2027 earnings for 9th November — five days after the shareholder vote. Naturally, it has prompted accusations of concealing crucial figures ahead of an important milestone in the company’s future. 
• The current board, under a Chair that has been in place since 1989, has largely followed the same strategic narrative, which activists argue has not produced any positive results. Because of this, activists say, the current board should have no role in picking a new CEO or steering the company.  

“This year, with the Annual Meeting just over two weeks away, shareholders have heard nothing,” Bergeron said. 

‘However, this election is not about a single quarter. After 20 years of deteriorating performance, including four consecutive quarters of fixed-cost deleveraging from declining sales, shareholders should have no reason to trust the Chairman and CEO and the incumbent Board’s promises of sustainable growth.”

The strategy has been to placate as much anger as possible with calming measures:

• The board approved a $76 million special cash dividend. 
• It also committed to approving a new CEO by the second half of 2027, with a succession plan to be drawn up to ensure this comes about on time. 

Bergeron has said this is too little, too late, and continued calling for an entirely fresh start.

It’s important to look at Ethan Allen’s merits first of all. The company has maintained a strong brand image. Kathwari has kept the company debt-free, especially impressive since multiple crises and industry trends have dented the appetite for home furnishings. Plus, although it has become a point of criticism from the activist side, dividend payments have been consistent through the years. 

However, there are also some governance red flags that we should note. Kathwari’s tenure is the first one. He’s been in a dual-CEO/Chair role for over 35 years, leading a small board, most of whom have been criticised for their deference to his way of thinking.

These things signal a stark lack of independent thinking, which is an essential ingredient of good governance. Directors simply must feel like they can speak their mind on strategic decisions, and not need to bow to strong leadership. If they don’t feel this, then the risk of poor decision-making is significantly heightened. 

The succession plan issue is another issue. These kinds of plans are supposed to be in place even at times when a Chair or CEO is enjoying enormous success and broad confidence among investors. In Ethan Allen’s case, a plan was only announced as a way to stem the tide of anger from activists. For a Chair/CEO to be in a role for over 35 years, and not have a robust succession plan in place in that time until criticism started to mount, is not good governance. Plain and simple. It’s a no-brainer that this lack of attention would encourage investors to demand a complete overhaul.