PHILADELPHIA--(BUSINESS WIRE)--For the third time in as many years, the majority of shareholders at Penn National Gaming, Inc. (NASDAQ: PENN) voted Wednesday to reform the way the company’s directors are elected. The resolution recommended that nominees to the board receive a majority of the votes cast in order to be seated. Under Penn’s current bylaws, a nominee needs only a single affirmative vote to be elected in uncontested director elections. The resolution was presented by UNITE HERE.
Last year shareholders at Penn passed a similar majority voting resolution. In 2010 shareholders voted to subject company directors to an annual election, a reform also designed to increase board accountability. The Penn board has failed to implement either measure. UNITE HERE was the sponsor of both resolutions.
Citing the board’s failure to enact last year’s winning shareholder proposal, ISS recommended withhold votes for the two director nominees, John M. Jacquemin and David A. Handler. “A proposal that receives support from a majority of a company’s total shares outstanding represents a strong call to action by the company’s shareholders. The board’s continual failure to take action demonstrates a lack of responsiveness to shareholder concerns,” wrote ISS in a May 22, 2012 report.
ISS additionally recommended that shareholders withhold votes on Handler due to his compensation committee membership. ISS cited persistent pay for performance misalignment and additional problematic pay practices and further recommended that shareholders vote against Penn’s compensation. ISS concluded, “The inclusion of these problematic pay practices such as excise tax gross-up provisions and immediate vesting of the cash severance component upon a change-in-control are problematic. Common market practice does not justify extraordinary financial burdens to companies and their shareholders. Further, the excise tax gross-up provision leads to such substantial increases in potential termination payments that the provision may encourage executives to negotiate merger agreements that may not be in the best interests of shareholders.”
Both Handler and Jacquemin were seated and the compensation proposal passed. The vote counts were not disclosed at Wednesday’s meeting. In past years members of the compensation committee have received significant withhold votes. In 2011 Penn received less than 60 percent support for its say-on-pay proposal.
“For three consecutive years, shareholders have voted for a change in the way PENN’s board is elected,” said UNITE HERE’s Kate O’Neil. “It is time for the board to respect the results of these votes and implement the reforms shareholders clearly support.”