We’ve come a long way in five years!

October 20, 2017. At the Fall meeting of the Council of Institutional Investors we released an interim progress report on our work to improve governance practices at lodging REITs.  Highlights include:

  • The vast majority of listed lodging REITs incorporated in Maryland now opt out of provisions of Maryland’s Unsolicited Takeovers Act (MUTA)
  • Roughly half now also allow shareholders to amend bylaws
  • REITs not allowing shareholders to amend bylaws have seen support for directors on corporate governance and nominating committees sink by about 25% in 2017
  • While most REITs have been responsive to shareholder calls for governance improvements, a small number have taken steps to limit shareholder participation.

Shareholders of the Free State – take cover!

October 31, 2016. Over 40% (18/44) of “zombie directors” haunting U.S. boardrooms this year oversee companies incorporated in Maryland, according to data collected by the Council of Institutional Investors (CII).

“Zombie directors” are corporate directors who continue to serve as shareholder representatives after having lost the support of a voting majority of shareholders.

It is comparatively rare for shareholders to withhold votes from corporate directors in large numbers.  The E & Y Center for Board Matters surveyed Russell 3000 companies and found that, on average, corporate directors received the support of 96% of votes cast in 2015.  Only 4% of directors received less than 80% support, and only 0.3% received less than majority support. Read more here.

Let shareholders of Maryland-incorporated companies gain the right to initiate bylaw amendments!

May 2016. At many companies, shareholders can pursue corporate governance reform through either recommendations to the board or through binding bylaw amendments. But for the many REITs incorporated in Maryland, shareholders cannot initiate binding bylaw amendments unless this right is affirmatively established by the company’s governing documents. In Delaware, where many hospitality C-corporations are incorporated, shareholders have this right by law (DGCL Sec. 109).

By our count, fifteen listed lodging companies currently permit shareholders to initiate bylaw amendments, including six lodging REITs.  Shareholders at four listed lodging REITs voted to recommend shareholders be given this right in 2015, with an average vote of 69% in favor.  Shareholders of three lodging REITs approved charter amendments this season to establish shareholders’ right to initiate bylaw amendments, bringing the number of lodging REITs granting this right to shareholders close to a majority. Read more here.

Stock buybacks: Do they work in the downcycle?

February 2016.  In 2015, lodging REIT stock prices lost more than a quarter of their value after six consecutive years of steady gains. At the same time, the private market value of hotel assets continued to climb, leading to steeply discounted company valuations. Lodging REITs have taken divergent responses to these developments, some pursuing asset, portfolio or business sales.  Seven lodging REITs have authorized share repurchases worth just over $2 billion, a range of 4% to 22% of company stock.

Are share buybacks by lodging REITs a good use of capital at this point in the cycle? Using an analysis of stock buybacks during the previous lodging cycle, a new report by UNITE HERE argues that lodging REIT shareholders may be better served at this point in the cycle by other strategies, such as special dividends financed by asset sales or an outright business sale.

Download our full report on stock buybacks here.

2015 proxy season roundup: A new standard of corporate governance for listed lodging REITs

When UNITE HERE began engaging with hospitality REITs over corporate governance issues in 2012, not a single company opted out of MUTA’s provisions and required shareholder approval to opt back in.  Roughly one third of lodging REITs had classified boards, two had poison pills not approved by shareholders and only company allowed shareholders to initiate bylaw amendments.  UNITE HERE’s program has established a stronger standard of corporate governance in hospitality REITs, and has led to tangible improvements in shareholder rights as the lodging cycle enters its eleventh quarter of recovery.

During the 2015 season, UNITE HERE put forward corporate governance proposals at fifteen listed hospitality Real Estate Investment Trusts (REIT) – the third year of a comprehensive program to bring widely adopted corporate governance reforms to the sector.  A complete list of proposals, voting results and outcomes can be found here; a printable report can be downloaded here.


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 pursued a program of improving shareholder rights at hospitality REITs.