Discovery Group asks Spanish Broadcasting shareholders to withhold votes at annual meeting June 3

By Lisa Kerner

Charlotte, N.C., May 6 - Spanish Broadcasting System Inc. investor Discovery Group said it will withhold its votes for the re-election of the company's directors at the annual meeting on June 3.

Discovery Group, one of Spanish Broadcasting's largest shareholders, sent a letter to fellow shareholders asking them to put the board on notice that "the status quo of mismanagement, poor operating performance, excessive executive compensation and weak governance is not acceptable."

According to a schedule 13D filed with the Securities and Exchange Commission, Discovery Group owns 9.8% of Spanish Broadcasting's class A common stock. Discovery Group's letter to shareholders was included in the filing.

"The Spanish Broadcasting directors need to ask themselves whether they are honestly and rigorously carrying out their stewardship responsibilities," managing partner Daniel J. Donoghue said in a Discovery Group news release.

Donoghue cited Spanish Broadcasting's net losses of $152.9 million since becoming a public company and the $17.6 million salary, bonuses and perks paid to Raul Alarcon, the company's chairman, chief executive officer, president and controlling shareholder.

Spanish Broadcasting's stock price fell from a high of $40.00 shortly after the public offering to $1.65 on April 30, Donoghue noted.

While stockholders can't prevent the re-election of the company's nominees due to a super-majority voting structure that gives Alarcon control, Discovery Group said withholding votes will send a message to the board and management that investors are dissatisfied.

In February, Discovery Group notified Spanish Broadcasting of its concerns including mismanagement of the company and the "steady destruction" of shareholder value.

The investor wanted Spanish Broadcasting to form a special committee to consider going private or a sale of the company and a revamping of the company's corporate governance.

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