Risk & Compliance

“Grand Theft Auto” Directors Driven Out

Investor group unseats five incumbents, including president and chief executive officer Paul Eibeler.
Stephen Taub and Dave CookMarch 30, 2007

A group of powerful investors moved in on Thursday’s annual meeting of Take-Two Interactive Software and took five board seats from the “Grand Theft Auto” video-game maker.

The investor group — including hedge-fund giants D.E. Shaw, SAC Capital, and Tudor Investment, as well as Oppenheimer Funds — employed an unusual tactic to take control of the board: rather than mailing out proxy materials to shareholders, they simply showed up and proposed their candidates in person at the meeting.

Since Take-Two has not adopted majority voting, the dissident slate needed only to receive more votes than the sitting directors. Voting its 46 percent holding in the company, the investor group quickly unseated five incumbent directors, including Paul Eibeler, who was also removed as president and chief executive officer.

New directors include former BMG Entertainment CEO Strauss Zelnick, who will serve as chairman, as well as Ben Feder, Jon J. Moses, Michael Dornemann, and Michael James Sheresky. John Levy, CEO of Board Advisory Services, retained his seat; a meeting of the newly constituted board later reelected another incumbent, independent director, Grover C. Brown.

“The new Board plans to put in place strategies designed to revitalize Take-Two, focus on supporting and enhancing its creative output, improve its margins, and ensure that the 2007 release pipeline meets expectations,” said Zelnick in a statement. “We are here to maximize the value of Take-Two for shareholders, for game consumers, and for the company’s employees.”

Last December Take-Two disclosed it would restate 10 years of results — its fourth restatement in five years. In a regulatory filing the next month, the company made clear that former chairman and chief executive officer Ryan Brant was at the wheel when the company’s compensation committee “abdicated its option granting responsibilities” and permitted him to “control and dominate the granting process.”

In February Brant pleaded guilty to falsifying records, becoming the first CEO convicted for his role in a stock-option backdating scheme.