Could Ethan Allen’s board lose seats in its fight with Doug Bergeron?

Contested annual meeting: Wednesday, Nov. 4, 2026 · Meeting page

On November 4, holders of Ethan Allen (ETD) vote on who will oversee the furniture maker’s next chief executive and the cash it pays out. Doug Bergeron, a former VeriFone chief executive whose group owns 5.2%, is running five nominees for all five seats; three would give his slate a majority. The board is backing its own five, led by Farooq Kathwari, 82, chair and chief executive since 1988.

Ethan Allen’s operating margin, the share of sales left as profit from the business, fell from 17.3% in fiscal 2023 to 7.8% in the year to June, as sales fell for a fourth year in a row. On $579 million of sales, each percentage point of margin is worth about $5.8 million a year of operating profit, for a company the stock market valued at about $508 million at the October 20 close.

Our read, as of October 20: the board is more likely to keep its majority than to lose it. The board’s insiders hold more votes than Bergeron, and holders re-elected every incumbent in Ethan Allen’s last proxy fight, in 2015. But four years of falling sales and a halved margin give Bergeron a real chance at one or two seats.

Ethan Allen has given back most of its pandemic margin gain

Ethan Allen’s sales were $579 million in the fiscal year to June, 27% below fiscal 2023. Operating profit fell faster, to $45 million from $137 million. In the quarter to June, retail orders fell 10.8% and wholesale orders 11.9% from a year earlier.

The 7.8% margin is back near where it was before the pandemic: 6.4% in fiscal 2018 and 4.5% in fiscal 2019, when sales were higher. The board says lower sales to the U.S. State Department accounted for 55% of the fiscal 2026 sales decline. Add China and outside dealers, it says, and the three accounted for about two-thirds. Among other furniture sellers, Ethan Allen’s 7.8% margin is higher than La-Z-Boy’s, Havertys’ and Bassett’s, though below RH’s and well below Williams-Sonoma’s.

At the 12.8% average of the past five years, a stretch that includes the pandemic boom, the same sales would produce about $74 million of operating profit. At fiscal 2018’s 6.4%, before the pandemic, they would produce about $37 million. Last year they produced $45 million.

The stock has trailed over one and three years. Including dividends, it lost 9.1% over the past year, against a gain of 12.3% for the Russell 2000 index of smaller companies, and lost 1.4% over three years, against a gain of 71.3% for the index. Over five years it returned 32.5%, slightly ahead of the index’s 29.1%.

Bergeron points to the share price, which rose only 2.5% in the five years to August 4, and says dividends supplied about 94% of the 45% total return. Returning cash from a shrinking business, he says, “is not the same as compounding shareholder value.” The board counts the same dividends as part of holders’ return and puts its five-year total return at 49.1% through September 21, against a 42.7% loss for the median company in its peer group.

The regular dividend takes almost all of last year’s free cash flow

Ethan Allen has no debt. Its regular dividend of $0.39 a quarter comes to about $39 million a year, a yield of 7.7% at the October 20 close. That $39 million is about 95% of last fiscal year’s free cash flow, the $41.4 million the business produced after investment. Total dividends that year, including a special one, were $46.3 million, and buybacks added $4.8 million, so payouts ran about $10 million above free cash flow. Over the past three fiscal years, free cash flow of $162 million covered dividends of $147 million.

Since June 30 Ethan Allen has paid holders $3.64 a share, about $92 million, or about half of the $187.5 million in cash and investments it held that day. Most of it was a $3.00 special dividend the board declared on August 19. Bergeron called it “a rash and reactive special dividend.” The board says it has paid a special dividend every year since 2021, including $0.25 declared on July 28, before Bergeron’s nominations.

If sales and margins keep falling, cash flow will cover less of the regular dividend. The board says it expects to keep about $85 million of cash and investments after the special dividend, enough to pay the regular dividend for a little over two years on its own.

Bergeron’s plan would “protect the regular dividend while funding growth that earns attractive returns.” In an August letter, he said he would pay for more marketing and digital selling partly by cutting “non-core costs and distractions, including the continued operation of a hotel.” He also said the company has “the potential to triple shareholder value over the next three years.” The board says Ethan Allen “continues to invest in marketing, digital, product and design centers,” and that Bergeron’s projections “rest on unsubstantiated operating assumptions.”

Holders will vote without the latest quarter. Ethan Allen will report first-quarter results, including cash after the special dividend, on November 9, five days after the meeting. Bergeron says results have come before the annual meeting for two decades. Ethan Allen says it gave three weeks’ notice of the date, as it has for the past four years, and that the date “has not been altered by the proxy contest.”

Control would bring an interim CEO and could trigger severance

Kathwari’s contract runs to June 30, 2027. On September 21 the board committed to name his successor by that date. It said it had hired a search firm and that Kathwari will leave the board at the 2027 annual meeting. The board says succession planning “has been under active Board consideration for several years,” since before Bergeron’s campaign. Bergeron called the plan “too little, too late.”

Bergeron’s plan starts with “an experienced interim CEO” in the first 100 days, with Kathwari offered a non-voting role as chairman emeritus. Bergeron ran the payments company VeriFone from 2001 to 2013, chaired Cantaloupe until its sale in May and was co-managing partner of the activist fund Hudson Executive Capital from 2020 to 2022.

Two of his nominees come from selling home furnishings online: Stephen Oblak was Wayfair’s chief commercial officer until 2023, and Anna Brockway co-founded Chairish, a marketplace for high-end home furnishings. Kristine Miller was eBay’s chief strategy officer and earlier led Bain’s North American retail practice. Stefanie Tsen Ward ran stores and customer programs at Neiman Marcus until March 2025. Bergeron says they bring brand and digital capabilities “noticeably absent from the current Board.”

The board’s four independent nominees come from advertising (David Sable, former chairman and chief executive of VMLY&R), commercial real estate (Tara Stacom, executive vice chairman of Cushman & Wakefield), the United Nations (Maria Eugenia Casar, its former finance chief) and software (Cynthia Ekberg Tsai, founder of Tana Systems). The board says Bergeron’s group “has not demonstrated comparable experience overseeing the full complexity of Ethan Allen’s vertically integrated operating model,” and that a full change would hand “oversight of both the business and the CEO search to five newcomers during an active leadership transition.”

Holders also vote on pay. Bergeron says the board cut the sales target for Kathwari’s fiscal 2025 bonus to $635 million from $725 million the year before, and his cash bonus rose to $1.04 million from $414,000 while sales and profit fell. The board says his fiscal 2026 bonus paid 46.2% of target, with nothing for operating profit. The company’s proxy statement shows that year’s sales target, $614.6 million, was set at the prior year’s actual sales. Bergeron’s group will vote against the pay resolution.

If Bergeron wins three or more seats without the board’s approval, the severance plan treats that as a change in control, a takeover of the board. Executives who are then let go, or who quit for “good reason,” such as a cut in their duties or pay, are paid. Ethan Allen’s figures for that case total about $10.9 million for its five top executives. Kathwari’s share is $8.3 million: $4.3 million of salary and bonus, and most of the rest performance shares valued at the June 30 price, which he would keep on retirement in any case. A one- or two-seat result would not count as a change in control.

Kathwari’s own contract goes further. Losing his board seat or his post as chairman counts as good reason for him to leave, with the same two years’ salary and bonus, about $4.3 million. So even one Bergeron seat could trigger that payment, if Kathwari is the board nominee who loses.

Bergeron would seek repayment of his campaign costs, about $3.5 million by mid-September, without a holder vote if his campaign succeeds. Ethan Allen expects its own added contest costs to reach $1.2 million.

Why we think the board is more likely to keep its majority

Directors and officers hold about 8.7% of the voting shares, by our estimate, against 5.2% for Bergeron’s group. The five nominees with the most votes win. To take control, Bergeron needs most of the votes cast by everyone else; to win a single seat, his best nominee has only to outpoll the board’s weakest.

BlackRock, Dimensional, Vanguard and Schwab alone hold about a quarter of the shares. Every current director won at least 97.7% support in 2025, in an uncontested vote, and funds run by BlackRock, Vanguard, Schwab and Royce voted for Kathwari. The 2015 contest is a better guide. Sandell Asset Management’s best nominee drew 10.3 million votes, 3.9 million fewer than the lowest-placed incumbent, out of 26.8 million shares present at the meeting.

Bergeron’s best case rests on the business record and on Kathwari himself. The board’s guidelines bar nominating a director past age 77 unless the board waives or extends the rule. Kathwari turned 77 in 2021, and the board has renominated him every year since. Some managers, including LGIM, voted against every director in 2025; LGIM said it “expects companies to separate the roles of Chair and CEO.” Holders this time use a universal card that lists all ten nominees, which makes a split result possible.

Our view: whoever wins, Ethan Allen needs new directors now, not only a new CEO next year

Long tenure at the top is fine when it delivers. This board has overseen four straight years of falling sales and an operating margin cut by more than half. It set a public deadline for succession about seven weeks after a 5% holder named a full slate; it says planning began years earlier. Bergeron has made a credible case that the board needs change.

The four independent directors own about 7,300 shares outright, worth about $150,000 at the October 20 close; Cynthia Ekberg Tsai bought 1,000 on August 5. Kathwari holds about 1.47 million shares directly, worth about $30 million. Since June 2024 he and family trusts have sold about 202,000 shares under trading plans set in advance; his family foundation, in which the company says he has no reportable financial interest, sold about 148,000 more. Bergeron’s group bought its 1.3 million shares between June 4 and August 25, some through call options, for about $29 million by our estimate. His four fellow nominees owned none as of his September 18 proxy statement, and their agreement with him bars them from trading the stock without his consent.

Replacing the whole board at once carries real risk. As of October 20, Bergeron had not named his interim CEO, and his view that Ethan Allen could triple shareholder value in three years has not been tested. Ethan Allen is debt-free and still profitable.

What we’d like to see: the board should release first-quarter results before November 4, so holders vote on current numbers. It should add independent directors with retail and digital experience now, not after the CEO search, and give them a role in choosing the next CEO. Whoever wins should set a margin goal and say how cash will be split between dividends, buybacks and the business. The board’s independent directors and Bergeron’s other nominees should buy the stock with their own money; Bergeron should let his nominees do so, and he should name the interim CEO he has in mind.

What to watch

• Nov. 4
  The annual meeting, online. Preliminary results usually follow within days; certified results come in an 8‑K.
• Nov. 9
  First-quarter results: orders, margin and cash after the $92 million of dividends since June.
• By June 30, 2027
  The board’s deadline to name Kathwari’s successor, if it keeps control.

Sources: Ethan Allen’s SEC filings and both sides’ proxy materials, as of October 20, 2026. Margin is operating income as a share of net sales. The insiders’ voting share excludes Kathwari’s deferred stock units and includes 575,191 shares held by a family foundation in which, the company says, Kathwari has no reportable financial interest, about 2.3 percentage points; without them it is about 6.4%. Returns are total returns to the Oct. 20 close. Boardroom Alpha is an independent research and analytics company and does not invest. This brief is for information only and is not investment advice or a proxy solicitation.