NEW YORK--(BUSINESS WIRE)--Yesterday, a second hotel company adopted provisions of shareholder proposals filed by UNITE HERE seeking to improve corporate governance policies, according to the hospitality union. Strategic Hotels & Resorts [NYSE: BEE] agreed to terminate its shareholder rights plan known as a “poison pill” and submit any future pill to a shareholder vote within 12 months. UNITE HERE has withdrawn its proposal in advance of Thursday’s annual stockholder meeting.
On April 29 ahead of its annual meeting, Sunstone Hotel Investors [NYSE: SHO] opted out of a key provision of Maryland REIT law, called the Maryland Unsolicited Takeovers Act, and changed its governance policies to require a shareholder vote before classifying its board of directors in the future. Sunstone currently has a declassified board.
Strong corporate governance structures are correlated with better returns, and shareholders are voting for changes in the hotel industry after a long awaited rebound. Last week, 73% of Hospitality Properties Trust’s [NYSE: HPT] outstanding shares were voted in support of UNITE HERE’s proposal to remove supermajority voting requirements from that company’s governing documents. HPT has chosen to ignore that vote, while it also reappoints a director who resigned after failing to garner a majority of votes cast in the election.
Shareholders at Morgans Hotel Group [NYSE: MHGC] will vote on a binding proposal submitted by UNITE HERE to terminate that company’s poison pill at its upcoming annual meeting, as competing shareholders vie for control of the board.
“Hotel companies have a choice,” says Courtney Alexander, Deputy Director of Research at UNITE HERE, “They can be responsive to stakeholders like these two just were, or they can build fortresses to protect related-party transactions which dominate companies like Hospitality Properties and Hyatt Hotels.”
Adoption of these measures by two leading hotel REITs is an indication that UNITE HERE’s corporate governance initiative is contributing to improved governance among hotel companies, despite the drawbacks associated with Maryland REIT law. Maryland REITs are permitted broad latitude to institute anti-takeover measures and other management protections by state law.
UNITE HERE is a union representing over 275,000 employees in the hotel, food service and gaming industries. Its members are beneficiaries of pension funds with over $60 billion in assets.