In a report to the U.S. Securities and Exchange Commission on April 6, CoStar Group said it is making changes to its board of directors, adding Christine M. McCarthy, John Berisford and Rachel C. Glaser, with hedge fund investors D.E. Shaw and Third Point in support. Former board chair Michael R. Klein, Christopher J. Nassetta and Laura C. Kaplan all resigned from the board, but the report noted that they were “not the result of any disagreement with the Company on any matter relating to its operations, policies or practices.”
CoStar CEO Andy Florance told RISMedia that it was more a case of a “board refresh,” something that had been planned for a while.
“I started the company when I was 21 years old,” he said. “The board that I originally had was significantly older than me. Mike Klein has been with us pretty much since I started the company. So there comes a time when you have to cycle your board and refresh your board. Mike did fantastic work through the years, but is now 83. And Chris Nassetta is a brilliant man, a wonderful operator. He’s been on the board for 23 years. He’s done more than his service. So what we’re doing is we’re bringing in some new names, refreshing the board and getting ready for the next 20 years of growth.”
Florance said there were no demands made by the investor hedge funds.
“The board of directors makes all those decisions,” he noted. “We are on track and hitting our goals. Since we went public, we have outperformed 98% of NASDAQ companies. That’s pretty impressive.”
CoStar Group’s stock is up 7% on the year, but down almost 20% over the last 12 months amid broader real estate market headwinds.
The new board members boast significant high-profile business leadership resumes, with McCarthy formerly serving as chief financial officer for Disney, Glaser having guided e-commerce giant Etsy’s financials and Berisford a former president of S&P Global Ratings.
Louise Sams, who has served on CoStar’s board since 2019, will take over as chair.
The board of directors also established a Capital Allocation Committee “to support the board’s and management’s comprehensive review of the company’s capital structure, capital allocation priorities and financial targets, including for international expansion and significant investments by the company’s major brands, including CoStar, Apartments.com, LoopNet and Homes.com.”
As part of its work, the committee will review the company’s ongoing investment in Homes.com and “ensure an appropriate timeline for profitability,” according to CoStar’s release. The committee includes independent directors Berisford, McCarthy and Robert Musslewhite. Florance will serve as chair of the committee.
The board additionally “intends to review the Company’s executive compensation programs to ensure management’s incentives remain aligned with stockholder value creation,” according to the company’s statement.
“With the strength and support of the refreshed board, CoStar Group is well positioned to extend its long track record of creating stockholder value,” added Florance in a press release. “We have invested in creating more than half a dozen highly profitable, category-leading digital real estate solutions by leveraging our research & development capabilities, massive data advantage and an online community of more than a billion real estate market participants. By maintaining our fortress balance sheet and strong cash flow profile, we will continue to build on our successes through disciplined investment in key growth initiatives across our platforms.”
