(Bloomberg) -- A shareholder in Box Inc. has come forward saying they intend to vote in favor of a slate of directors put forth by activist investor Starboard Value, citing ongoing governance concerns at the software company.

Starboard, which owns an 8.6% stake in Box, has nominated three directors to the board. The New York-based hedge fund has raised numerous concerns about the company’s performance and governance, including its board’s decision take a $500 million investment from private equity giant KKR & Co. in April in exchange for preferred shares and a seat on the board.

Starboard has argued the financing arrangement served no business purpose, and has noted that KKR subsequently syndicated 70% of the investment, reducing its direct investment to $150 million, well below Starboard’s own stake.

P. Schoenfeld Asset Management, which owns a 1% stake in Box, said it too was concerned about the financing. Peter Schoenfeld, the firm’s chief executive officer, said issuing the preferred shares in front a proxy fight with no need for the cash seemed to be “naked parking of votes for management.” He said his firm would vote in favor of Starboard’s slate of three directors as a result.

“The Box board has continually exercised poor corporate governance,” Schoenfeld said in an email. He noted that in addition to the questionable financing arrangement, Box’s board remains staggered, which means only three directors will stand for election at a meeting slated for Sept. 9 instead of the whole board.

“All this in the face of substantial continuing underperformance to peers (despite some very recent improvements). We think the company badly needs true shareholder representation on the board,” he said.

A representative for Starboard declined to comment. A representative for Box wasn’t immediately available for comment.

ISS Recommendation

Starboard faces an uphill battle after a prominent shareholder advisory firm, Institutional Shareholder Services Inc., said this week that support for its nominees was unwarranted. ISS credited Starboard’s engagement for recent improvements at the company, and said its concerns about the KKR deal “appear valid.” But it said it didn’t believe additional Starboard representation was needed on the board after two new directors were added as part of a settlement with the activist last year. ISS recommended shareholders support two of Box’s three nominees, and withhold support for incumbent director Dana Evan due to the ongoing governance issues.

Box delivered results Wednesday that exceeded analyst expectations, boosting its earnings outlook for the fiscal year 2022. Shares fell 1% Thursday to $25.39 at 3:20 p.m. in New York, giving the company a market value of $3.9 billion.

Matthew Coss, an analyst with JPMorgan Chase & Co., said he viewed the improvements at Box with “cautious optimism.” He said some metrics, like retention and revenue growth, should continue to improve under a combination of product offerings and a favorable macroeconomic backdrop.

“However, we think that investors have acquired some level of pattern recognition with Box’s history of falling short of long-term targets and that they have not yet developed confidence in sustained improvement in key metrics,” he said in a note to clients Thursday.

Another proxy advisory firm, Glass Lewis & Co., urged investors to support the appointment of Starboard managing member Peter Feld.

“The election of a direct shareholder representative would provide an immediate cross-check on Box’s governance and financing architecture, and fresh perspective on Box’s nascent effort to turn around years of poor performance and decidedly subpar shareholder returns,” it said in a report Friday.

(Adds details from Glass Lewis report in last two paragraphs)

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