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Darden CEO to step down amid Olive Garden troubles

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.

Join the discussion

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petpetdon July 29 2014 at 6:20 AM

Customers had begun turning away from those chains as they cut back on spending during the recession.

This might be partially true. But, the reality is that Olive Garden and Red Lobster's food is terrible. Olive Garden is Italian food for beginners. Red Lobster's food is seafood for beginners. If you are somewhat of a cook you make anything on the Olive Garden menu for about 30% of what it would cost you to go eat there. Stouffer's frozen lasagna is way better. If you can't cook got buy a cookbook and teach yourself how to cook.

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7 replies
jspmcca July 29 2014 at 9:07 AM


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7 replies
arcoregar July 29 2014 at 7:39 AM

Yet another CEO that made big bucks for driving their companies into the ground.

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1 reply
buzzyseed arcoregar July 29 2014 at 8:08 AM

Or another black guy that doesn't know how to lead........

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3 replies
Brian July 29 2014 at 8:54 AM

There will never be a successful corporate Italian restaurant. You may fool some people in the short run but it will catch up with you. Great Italian restaurants are run by people who love great Italian food. We can spot a fake.

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6 replies
Frank S. Pedigo July 29 2014 at 6:47 AM

I can see why red lobster is going under . The food has to be over seasoned to cover the fact it is cheap imported fish and shrimp raised in industrial waste . Then of course olive garden using imported lettice in their salads even after people complian of geting sick from it . But then what do you expect when companies try to do things on the cheap .

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the902inc July 29 2014 at 8:43 AM

2 of my LEAST favourite restaurants: Olive Garden & Red Lobster----glad they are failing!

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4 replies
TYLER July 29 2014 at 10:59 AM

Darden has had a long standing policy of treating everybody like they are expendable. Employees, suppliers, contractor and coustomers. I have said for a long time that all that bad karma they were throwing out would come back and bite them in the rearend. RIP you scum suckers. Bwahahahaha. Couldn't happen to a more deserving company.

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bdgrizcp July 29 2014 at 9:42 AM

It's like the problem is obvious: Red Lobster charges more for a Maine lobster than any of its local competitors, and their fish selection is quite thin. Their 'jumbo' shrimp we call bait in Florida. As for Olive Garden, who ever heard of an Italian restaurant that doesn't serve osso bucco?

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stevebakerguitar July 29 2014 at 6:34 AM

Let me guess.... their republicans

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6 replies
clwgeorgetownlaw July 29 2014 at 10:16 AM

And the CEO revolving door continues.... He will land a similar job soon. Ebay's top bozo is about to get the boot so there's a resume tip for you Darden.....It's all about how to play a ponzi scheme with "profits" from quarter to quarter while you screw the American public including your workforce. This private club of sociopath CEO's continue to laugh all the way to the bank.

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