GLOBAL - Six US pension funds have written to the shareowners of real estate company Hospitality Properties Trust (HPT) urging them to vote against the re-election of two trustees due to "poor" governance practices.
The letter - which was signed by one of the largest US pension funds California Public Employees' Retirement System (CalPERS), as well as the California State Teachers' Retirement System (CalSTRS), Public Employees' Retirement Association of Colorado, Florida State Board of Administration, North Carolina Retirement Systems and Ohio Public Employees Retirement System (PERS) - argued that Bruce Gans, an independent trustee and director of HPT since 2009, and Adam Portnoy, managing trustee of the company since 2007, should not be re-elected.
The six pension plans argued that it was time for the HPT board to be "held accountable" for what it deemed the "poor" governance performance of the company.
In their joint letter to shareholders, the public sector schemes said: "We are taking this extraordinary action because it is time for the HPT board to be held accountable for HPT's overall poor governance practices and for the board's persistent failure to adopt governance reforms that have consistently and overwhelmingly been supported by shareowners."
According to the six pension plans, owners of 1.9% of HPT's shares, company founder Barry Portnoy and his son Adam occupy 40% of the five-member board while owning only 0.3% of outstanding shares.
In addition, the US shareowners voiced their concerns over the "potential insularity" of the board, with Barry Portnoy and independent trustee John Harrington having served on the board together for 17 years.
"Furthermore", they said, "for the years in which all other trustees were appointed to the board, as well as for the years immediately prior to their appointment, the company discloses having paid no independent third party to identify or to assist in the evaluation of candidates for board service."
The pension funds also claimed that, for the past three consecutive years, shareowner proposals to declassify the board won "overwhelming" support from shareowners, receiving in each year a "supermajority" of the votes cast and a majority of outstanding shares.
"The proposal received support from over 73% of voting shares in 2009, over 90% in 2010 and over 88% in 2011," they added. "The company has yet to adopt the reform."
The letter follows a proposal made by CalPERS back in 2010 to eliminate HPT's supermajority voting requirements.
In April last year, CalPERS then asked the real estate investment trust to adopt the practice of holding annual board elections.
According to CalPERS, the proposal made in 2010 won support of more than 88% of voting shares, but HPT has yet to adopt the reform.