NEW YORK--(BUSINESS WIRE)--Less than two months before Hospitality Properties Trust [Nasdaq: HPT] was to begin annual director elections for its entire board of directors – for the first time in its history - the board abruptly reversed course, reinstating multi-year, staggered terms for directors.
HPT’s move comes as a slap in the face to investors who voted for five years in support of annual director elections, then voted for three years to protect this right from a Maryland state law loophole.
The need for annual director elections at HPT has been a point of consensus among its investors: large majorities of voting shareholders (75-91% of votes cast) supported a CalPERS proposal to declassify HPT’s board every year between 2009 and 2013. HPT's board did not initiate declassification of its Board until 2014.
To protect the hard-won right to annual director elections at HPT, UNITE HERE submitted a shareholder proposal recommending the Board opt out of Maryland’s Unsolicited Takeovers Act (MUTA). MUTA allows a board to reclassify without shareholder approval, among other takeover defenses. HPT shareholders also repeatedly supported these proposals with large majorities of votes cast (77%-97% of votes cast) every year between 2014 and 2016. Shareholders are set to vote on the same proposal in 2017 (Proposal 5). A majority of listed lodging REITs have opted out of at least one provision of MUTA.
Meanwhile, the Board has stripped other important rights from shareholders, including passing new bylaw amendments that sharply limit shareholders' ability to nominate, or propose the removal of, their director representatives. These restrictive amendments may impact more than 97% of the Company's current institutional investors.
HPT’s shareholders have expressed their discontent at the ballot box. No incumbent HPT director nominee over the past two years has won the support of a voting majority of shareholders, but all were reappointed.
The ability of HPT’s board to entrench itself is enabled by Maryland state statutes. In Delaware, where the majority of U.S. companies and trusts are incorporated, the right of shareowners to amend bylaws is expressly protected by statute. In Maryland, company charters or bylaws may strip that right from shareholders (as is the case with HPT).
We urge shareholders vote YES on proposal 5 (opt out of Maryland’s Unsolicited Takeover Act), Proposal 6 (adopt proxy access) and to vote AGAINST all director nominees who just removed shareholders’ hard-won right to elect directors annually.
UNITE HERE represents hospitality workers and is a member of the Council of Institutional Investors. Its members are beneficiaries of pension funds with over $60 billion in assets. Since 2012, UNITE HERE has worked to improve shareholder rights at hospitality REITs. There is a labor dispute at one hotel owned by HPT. For additional information, please see http://www.hotelcorpgov.org.