Luby’s Inc. (NYSE:LUB) board of directors may be in trouble after a proxy advisor recommended that shareholders vote for three board candidates backed by the company’s largest independent shareholder. Ramius Capital, which owns around 9.6% of the company’s shares, nominated four directors in its quest to unlock shareholder value but the proxy group noted that three should be sufficient to influence the board to consider the issues.

Ramius Capital, an activist hedge fund, suggested that the company consider strategic alternatives, including selling real estate and leasing back the sites for its restaurants. The move could provide the restaurant chain with a massive cash influx that could be used to enhance shareholder value through buybacks or dividends. The move could help boost shares substantially after they have been hit by poor performance during recent months.

Proxy Governance, a proxy advisory firm, said, “We believe that, even in the event that they brought no new operational ideas or business strategies to the table, the dissident’s nominees would still offer a significant opportunity to shareholders in their willingness to consider governance changes at the company, something the current board has been reluctant to allow.”

Meanwhile, the Luby’s board urged shareholders to reject the offer, arguing that Ramius is attempting to masquerade as a corporate governance and restaurant industry expert while really focusing on short-term strategies designed to rob the company of operating cash flows and kill future growth prospects. This thinking likely stemmed from the fact that the hedge fund initially requested that the company put itself up for sale; however, the hedge fund insists that it would not use its director control to influence the company. Regardless, this is definitely a stock worth watching!

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