This flight may get even bumpier for Darden Restaurants.
The owner of the Olive Garden, Bahama Breeze and Red Lobster chains, already taking heat from investors for an unappetizing financial performance, is now facing governance questions over a corporate-aircraft contract.
The Orlando-based restaurateur disclosed in August that it paid about $1 million in hangar rental, fuel and other company-jet-related expenses to Signature Flight Support Corp. — a firm whose president and operating chief, Maria Sastre, sits as an independent director on Darden’s board.
Darden had disclosed in securities filings that it has done business “from time to time” and at “arms length” with Signature Flight. This year, Darden reaffirmed that the service costs for its twin-engine Cessna Citation Sovereign, an $18 million eight-seater, were “immaterial” to its finances.
Nevertheless, some corporate-governance experts took aim at the arrangement, citing a possible conflict of interest that hasn’t been adequately addressed.
“It’s not kosher, it’s not OK — I can’t imagine that it is,” said Eleanor Bloxham, CEO of the Value Alliance, an adviser to corporate boards. “Even if they were cutting the best deal in the world, they should avoid the perception that there’s a lack of independence there.”
Darden, a spokesman said, wasn’t immediately able to comment. Signature Flight, where 58-year-old Sastre has been a top exec since 2010, didn’t respond to a request for comment.
The tie-up is drawing scrutiny as Darden Chairman and CEO Clarence Otis has come under fire from activist shareholders and some analysts. who charge that the company has pursued a costly, ill-advised growth strategy.
“I think part of the problem is that the chairman of the board and the CEO are the same person,” said Howard Penney of Hedgeye Risk Management, which published a scathing, 32-page report this month on Darden’s missteps.
“Clarence hasn’t had anybody watching over him, so to speak,” said Penney, who blasts Otis for making Olive Garden’s menu overly complex, confusing patrons and straining the kitchens and waitstaff.
Barington Capital, an activist hedge fund that has lately rattled cages at Jones Group and elsewhere, demanded in a Sept. 23 letter that Darden put the brakes on expansion while cutting costs.
Darden could boost shareholder value by splitting into separate business units, slashing expenses and cashing in on its real estate, Barington argued in the letter.
However, some on Wall Street, like Telsey Advisory Group, question whether a breakup of Darden would guarantee better returns for investors.
Darden shares have fallen 3.5 percent over the past year. They are up 15.3 percent this year but still trail the 23 percent rise in the S&P 500 Index.