Insperity Inc. (NYSE: NSP) shareholder Starboard Value LP disclosed it has a 13.2% ownership stake in the PEO that it says makes it the largest shareholder. Starboard also outlined suggestions it made to Chairman and CEO Paul Sarvadi and the Insperity board aimed at creating shareholder value that include possibly selling the company.

"We have reviewed Starboard’s recent filing. Although this is the first communication made by Starboard, we welcome any new shareholder and value their input," an Insperity spokesperson said in a statement. "Consistent with the Board's fiduciary duties and our commitment to engage in constructive dialogue with all stockholders, we will review the contents of the filing with the full Board of Directors."

In the letter, Starboard called for the company to:

Reduce operating expenses:

“We believe there is a substantial opportunity to improve Insperity’s operating margins through a combination of reducing excessive corporate overhead expenses and more efficiently allocating advertising expenses,” Starboard wrote. “Over the past year, Insperity spent more than $83 million on general & administrative expenses, which is approximately 21.2% of net revenue. We believe that this is an excessive amount of expense for a company of Insperity's size, and its G&A ratio far exceeds that of its peers.”

Starboard cited Insperity’s ownership of two 37-seat corporate jets and a current advertising budget geared towards expensive television advertising, golf tournaments and other golf and sports-related marketing as areas for concern.

Improve capital allocation:

Starboard called for Insperity to use its existing cash to aggressively repurchase shares and said Insperity could repurchase approximately 20% of its current shares outstanding without using leverage.

“Given Insperity’s stable business characteristics and low capital-intensity, we believe that Insperity’s current capital structure is sub-optimal,” Starboard wrote. “Insperity continues to maintain a large net cash balance, earning little or no return for shareholders, while many other companies in the industry deploy leverage in order to maintain a more rational capital structure. For example, Insperity’s closest public competitor, TriNet (NYSE: TNET), is currently levered at approximately 2.5x EBITDA.”

Explore alternatives to maximize shareholder value:

Starboard said the company should engage a reputable investment bank to explore a sale of the company.

“Insperity is a unique asset in an industry that has seen significant consolidation in recent years,” Starboard said. “We believe that there are numerous strategic and financial buyers that would be interested in acquiring the company which would result in a robust sale process. We believe that financial buyers would be attracted to Insperity’s stable business characteristics and cash flow generation potential. In addition, there appear to be a handful of obvious strategic buyers for Insperity that would benefit from the company’s established customer base and would be able to realize substantial synergies.”

Last year, Insperity shareholder Stadium Capital Management called for the C-suite to look into the possibility of selling the company.