Darden CEO to step down amid Olive Garden troubles
A Darden Restaurants Inc. Olive Garden location stands in Peoria, Illinois, U.S., on Tuesday, March 18, 2014. Darden Restaurants Inc. is scheduled to release earnings figures on March 21. Photographer: Daniel Acker/Bloomberg via Getty Images
A Longhorn Steakhouse restaurant is seen Monday, July 21, 2008, in Hamilton, N.J. After Darden Restaurants Inc. bought LongHorn for $1.19 billion in October, it instituted what it calls "a more disciplined" tip-sharing plan _ a policy servers say is cutting their earnings. (AP Photo/Mel Evans)
BOSTON, MA - NOVEMBER 4: A sign at the entrance to The Capital Grille restaurant on November 4, 2012 in Boston, Massachusetts. Despite a global recession that has lasted five years, international tourism remains strong in this historic Northeast city known for its ''Freedom Trail'' walking tour. (Photo by George Rose/Getty Images)
Orlando, Florida, Bahama Breeze restaurant on International Drive (I-Drive)
(bb) dining14_bb_1 -- Yard House restaurant and pub at Colorado Mills mall. Brian Brainerd/The Denver Post (Photo By Brian Brainerd/The Denver Post via Getty Images)
A Yard House Restaurant in Northridge California
Oct. 18, 2010 - Corona Del Mar - Seasons 52 sits below The Capital Grille at South Coast Plaza. The new restaurant serves seasonally-inspired cuisine with nothing on the menu over 475 calories.(Credit Image: Â© The Orange County Register/ZUMApress.com)
April 30, 2013 - Tampa, Florida, U.S. - DANIEL WALLACE | Times.Eddie V's Prime Seafood opened April 4 at 4400 W Boy Scout Blvd. across from International Plaza. It's the ninth nationwide and first east of Texas. It's also the first location to open since Darden Restaurants took over the chain in 2011. Orlando-based Darden also owns Red Lobster, Olive Garden, Longhorn Steakhouse, Capital Grille, Bahama Breeze and Seasons 52. Eddie V's is a stylish, contemporary space with original artwork and lighting, a glass-enclosed wine cellar, a huge bar and nightly jazz music. (Credit Image: Â© Daniel
Oct. 18, 2010 - Corona Del Mar - Fire pits surround Seasons 52 at South Coast Plaza. A striking water sculpture, background, is near the entrance of the Costa Mesa restaurant.(Credit Image: Â© The Orange County Register/ZUMApress.com)
NEW YORK (AP) - Darden Restaurants CEO and Chairman Clarence Otis is stepping down as the company fights to fix its flagship Olive Garden chain following its contested sale of Red Lobster.
The company, based in Orlando, Florida, also said Monday that it's changing its corporate policies to split the CEO and chairman roles. It appointed lead independent director Charles Ledsinger Jr. as independent non-executive chairman, effective immediately.
Darden shares rose $2.03, or 4.5 percent, to $46.95 in after-hours trading.
Otis joined Darden in 1995, ascended to the CEO spot in late 2004, and became chairman a year later. His departure isn't entirely a surprise, given Darden's troubles. The company has been pressured to turn around declining sales at Olive Garden and Red Lobster. Customers had begun turning away from those chains as they cut back on spending during the recession.
Darden Restaurants Inc. earlier on Monday announced that it had completed the sale of Red Lobster to investment firm Golden Gate Capital. Activist investors Barington Capital and Starboard Value had objected to the nature of the breakup.
Barington had also said in March that it was time for Darden to start looking for a new chief executive, citing the company's "rapidly deteriorating financial performance." Last week, Starboard said it was suing Darden for documents related to Red Lobster's sale.
The company also said Monday that it expects to nominate nine of its independent directors for its board, meaning that at least three Starboard nominees would be elected. But Darden said it failed to reach an agreement with Starboard over the investment firm's pending proxy contest after settlement discussions.
Starboard said in a statement: "It is a shame for all Darden shareholders that this change happened only after the Board sanctioned the destruction of a billion dollars in shareholder value by approving the Red Lobster sale against the vehement objections of its shareholders."
A new CEO and an independent chairman were "positive steps," but three Starboard board seats were not enough, said Barington CEO James Mitarotonda in an emailed statement.
"Significant change is required in the Darden boardroom that can only be accomplished through the election to the board of a new slate of independent directors," he said.
Starboard has nominated 12 directors for Darden's board.
Otis will serve as CEO until a successor is named or Dec. 31, whichever comes first. The company said it will start looking for a replacement for him.