Metropolitan Capital urged Cyberonics (NDAQ:CYBX) shareholders to send a message to the company's board today in a press release intended to inform shareholders of its own nominations to the company's board of directors. In the press release, the company outlined the problems facing the company, and why change is necessary in order to unlock shareholder value in the long-term. These problems ranged from lack of board supervision to backdating scandals to poor corporate governance. Here's an overview of the fund's concerns:

"Lack of Board Supervision - The current members of the Board failed to adequately supervise and hold management accountable, and during a period of significant share price underperformance, on multiple occasions, approved compensation and severance packages for the former CEO that we consider to be highly excessive and inappropriate in light of the Company's poor share price performance and the circumstances surrounding his departure.

In contrast to the losses incurred by Cyberonics shareholders over the last few years the former CEO banked tens of millions of dollars in compensation, restricted stock awards and sales proceeds from options grants all thanks to the largesse of the incumbent Board. Even after his forced resignation, under a cloud of suspicion, and in the wake of the options back- dating scandal that has been so costly to Cyberonics shareholders, the present Board authorized a severance package for the former CEO that we value to be worth at least $5 million. Ask yourselves, "how did this severance package serve the shareholder's interests?"

Options Back-dating Scandal - Over an extended period the Company appears to have engaged in a process of options back-dating and spring-loading. The fallout from this malfeasance continues to be felt by the Company and its shareholders. In late November, when the Audit Committee announced the completion of their review of the Company's stock option practices, the Company estimated a charge of $10 million would be taken. The Company trumpeted its ability to "move forward from this point and execute on its business plan." By last week, the charge had increased to over $18 million-but unfortunately this time there was no boastful press release-that information had to be dug out of the Company's 10K, which was finally filed, albeit nearly six months late. As shareholders we must ask ourselves, "is this lack of transparency the best way for the Company to move forward and begin to rebuild its credibility?"

Lack of Good Corporate Governance - The incumbent members of the Board have seemingly been inured to issues of deficient corporate governance and have only reluctantly begun to address those issues under the threat of court action and in the face of our proxy fight.

Shortly thereafter, the Board approved a new five year contract for the former CEO-despite his having nearly three years remaining on his existing contract! The NEW contract increased his base compensation by more than 50% and included a substantial grant of restricted stock. Little more than a year later, the same Board found itself approving the aforementioned $5 million severance package for that former CEO.

Failure to Separate the Offices of CEO and Board Chair- It took nearly six months from the time we first raised the need to separate the posts of CEO and Board Chair with Company representatives for the Company to implement this basic and widely accepted policy of sound corporate governance (and this was only done after the former CEO, who also held the title of Chairman of the Board resigned under the weight of the options scandal).

Failure to Timely Hold Annual Meeting- After months of our petitioning them to do so, the Board only agreed to hold its 2006 annual meeting of shareholders on Feb 1, 2007, in order to settle the suit we filed in the Delaware Chancery Court to compel the Company to set a meeting date."

This information is not only important for Cyberonics shareholders to consider, but also shareholders in other companies. Many of the issues listed are precursors to problems - shareholders should be on the lookout for these warning signs before its too late.