May 3, 2012
External Affairs Branch
Robert Udall Glazier, Deputy Executive Officer
Brad Pacheco, Chief, Office of Public Affairs
CalPERS Calls for Annual Election of Hospitality Properties Trust Directors
SACRAMENTO, CA – The California Public Employees’ Retirement System (CalPERS) is asking shareowners to support a proposal calling for the annual election of all directors for Hospitality Properties Trust's (HPT) Board of Trustees. Two major proxy advisors, Glass, Lewis & Co. and ISS Proxy Advisory Services, issued analyses supporting the CalPERS proposal.
Proposal #6, the pension fund’s non-binding shareowner resolution on the agenda at the May 9 annual meeting, asks the company to take the necessary steps to implement annual elections for all company directors.
Currently, HPT’s board structure calls for staggered elections of its directors, allowing shareowners to only vote on a portion of the board at any given time and making it difficult to hold directors accountable for company performance. Directors each serve three-year terms.
“Empirical evidence has suggested that such a structure is not in shareholders’ best interests from a financial perspective,” ISS said in its advisory letter. “The ability to elect directors is the single most important use of the shareholder franchise, and all directors should be accountable on an annual basis.”
In its recommendation, Glass Lewis said that classified boards are not in the best interest of shareholders. “Glass Lewis believes that the ability to withhold votes from or vote against directors is a powerful mechanism through which shareholders may express dissatisfaction with company or director performance.”
“CalPERS believes that annual director elections promote greater accountability by allowing shareowners to communicate their viewpoint on their director representatives each and every year,” Anne Simpson, CalPERS Senior Portfolio Manager for Investments and Director of Corporate Governance, said in a letter to shareowners. The CalPERS letter said 57 percent of the Russell 1000 and 67 percent of the S&P 500 have introduced annual director elections.
Simpson’s letter also indicated that similar CalPERS proposals – submitted in 2009, 2010 and 2011 to HPT – received 73, 90 and 88 percent shareowner support, respectively. It stated that the board’s failure to respond to shareowners positively is an “issue of concern.”
In conjunction with the shareowner resolution, CalPERS will also be withholding vote from director nominees Bruce Gans and Adam Portnoy for the board’s failure to adopt governance reforms approved by a majority of its shareowners for the past three consecutive years.
CalPERS owned approximately 1,143,284 shares of Hospitality Properties Trust as of February 17, 2012.
CalPERS, with assets of approximately $237 billion, is the largest public pension fund in the U.S. It administers retirement benefits for more than 1.6 million California state, local government, and public school employees, retirees, and their families on behalf of more than 3,000 public employers, and health benefits for more than 1.3 million enrollees. The average CalPERS pension benefit is $2,332 per month. The average benefit for those who retired in the most recent fiscal year that ended June 30, 2011, is $3,065 per month. More information about CalPERS is available at www.calpers.ca.gov.
Additional ResourcesCouncil of Institutional Investors Letter to Shareowners (PDF, 103 KB)
Hospitality Properties Trust Shareowner Letter (PDF, 32 KB)