Bed Bath & Beyond - Photo: Anthony92931 via Wikimedia Commons Photo: Anthony92931 via Wikimedia Commons

The chief executive of Bed Bath & Beyond Inc. resigned days after an activist hedge fund sued the retailer over its alleged attempt to shut down a proxy battle seeking to reshape the board after years of poor performance.

The company, headquartered in Union, announced May 13 that Steven H. Temares had stepped down after serving for more than 15 years as CEO. Bed Bath & Beyond said Mary Winston, a “seasoned” public company executive who recently joined the company’s board of directors, had been appointed as interim CEO and would assume her new duties immediately.

The move comes as the domestic goods retailer is looking to revamp its business amid pressure from investors frustrated by the company’s leadership and a lagging stock performance.

Bed Bath & Beyond said in its announcement that it had formed a CEO search committee and will hire an outside firm to assist in the process, which would focus on candidates with transformation and innovation experience in the retail sector. In addition to the executive-level changes, the company named director Andrea Weiss as head of a board committee tasked with overseeing the ongoing business transformation.

“As the company continues its efforts to improve its financial performance and enhance its competitive position, the board determined that now is the right time to identify the next generation of leadership,” Patrick Gaston, Bed, Bath & Beyond’s independent chairman, said in a statement.

Legion Partners Holdings, in a lawsuit filed May 10 in the U.S. District Court for the Southern District of New York, cited Bed Bath & Beyond’s “disastrous” performance during Temares’ 15-year tenure, which it said coincided with a loss of $8 billion in market value and an 80% decline in the company’s stock.

Legion, along with Macellum Advisors GP and Ancora Advisors LLC, had been pushing to replace the company’s entire board with its own slate of 16 candidates at a planned stockholder meeting this summer. However, the complaint claimed that the company was using the threat of default on a $1.5 billion credit agreement as the “ultimate firewall” to keep the incumbent directors in place.

According to the filing, the majority’s removal could trigger a change of control under the agreement, which would give the lender the right to declare an event of default. Legion said the board had the power to stave off the threat of default by approving its nominees as “continuing directors” solely for purposes of the change-of-control clause, but has not given the proposal any serious consideration.

The board’s approval, Legion said, would not amount to an endorsement, and the directors would still be able to oppose its nominees in a proxy fight.

“Bed Bath shareholders should have the ability to choose freely between Legion’s slate and the incumbent slate at the annual meeting. Defendants, however, have no interest in a fair election,” Legion’s Olshan Frome Wolosky attorneys said in the 15-page complaint.

“The director defendants’ refusal to approve the nominees serves no corporate interest and has no purpose other than to infringe upon shareholders’ exercise of their right to vote as well as plaintiff’s right to run a competing slate,” the complaint said.

Bed Bath & Beyond announced earlier this month that two veteran directors had retired, reducing the size of the board from 12 seats to 10. The company also said that five of its longest-tenured independent directors resigned and that it had appointed five new directors to take their place.

In response, Legion scaled back its proposed slate of nominees last week to include just 10 names.

In a statement, Bed Bath & Beyond accused Legion and its allies of spreading “misinformation,” saying that it was considering the request and would “act in a manner consistent with the company’s obligations” under its indenture.

“Bed Bath & Beyond has attempted to settle with the activist group on several occasions and we remain ready and willing to engage constructively with the activist group to reach a resolution,” the company said last week.

After the leadership changes were announced, Bed Bath & Beyond said its board would consist of nine members, eight of whom are independent.

Legion is represented by Adrienne M. Ward, Thomas J. Fleming and Richard W. Nicholson Jr. of Olshan Frome Wolosky in New York.

An online docket-tracking service did not list counsel for the company and its directors.

The case, captioned Legion Partners Holdings v. Bed Bath & Beyond, has not yet been assigned to a judge.