Royal Caribbean Cruises Ltd. (RCL:US) shareholders approved an non-binding resolution to eliminate staggered terms for directors, dealing a defeat to Chairman and Chief Executive Officer Richard Fain.
The measure passed with backing from more than 72 percent of shares voted, company officials said today at Royal Caribbean’s annual meeting in Miami. The company’s largest investor, Oslo-based A. Wilhelmsen AS, said last week it would vote its 19 percent stake in favor of the proposal.
Fain said at the meeting that the board, which opposed the measure, would consider the results. Its passage could lead to broader changes, including separation of the chairman and CEO roles and turnover at the board, said investor Robert Kurte, who with his father sponsored the proposal and a similar one that failed in 2009.
‘We are pleased with today’s results,’’ Kurte, a 42-year-old consultant in Weston, Florida, said at the meeting. “We look forward to working with the board to see the declassification proposal put into effect.”
The Kurtes’ plan calls for each board member to come up for an annual vote. Directors at the company currently serve three-year terms, with no more than four standing for election at a time.
Such staggering of board terms presents a hurdle to activist investors, because they require a multi-year effort to make changes. Advisory firms Institutional Shareholder Services and Glass Lewis & Co. recommended in favor of the plan.
“We take these things very seriously and the board will look very closely at the proposal,” Fain, 65, said in an interview. “We’re very conscious of trying to have good corporate governance on all levels.”
Royal Caribbean slipped 1.9 percent to $36.18 at the close in New York. The shares have advanced 6.4 percent this year, lagging (RCL:US) behind the 16 percent rise in the Russell 1000 Index.
A. Wilhelmsen, which owns shipping and real estate interests, didn’t support the plan four years ago, a person close to the company said yesterday. Chairman Arne Alexander Wilhelmsen is a Royal Caribbean director.
“When the largest shareholder wants it, I think that’s a big signal,” D. Daniel Sokol, who teaches corporate law at the University of Florida in Gainesville, said before the vote. “They’re responding to a larger trend for what constitutes good corporate governance.”
Until 2011, A. Wilhelmsen was part of an agreement to vote its shares with the next-largest investor, Cruise Associates, comprised of members of Chicago’s Pritzker family and Israel’s Ofer clan. Together, the three own about 36 percent of Royal Caribbean, data (RCL:US) compiled by Bloomberg show.
“Royal Caribbean shareholders would be better served by a board whose members are elected annually,” A. Wilhelmsen said in a statement last week.
Thomas Pritzker, 62, a Royal Caribbean board member who was re-elected, didn’t return a call seeking comment this week. He is chairman of Hyatt Hotels Corp. (H:US) Royal Caribbean director Eyal Ofer, a 62-year-old shipping and real-estate magnate worth $6.1 billion according to the Bloomberg Billionaires Index, declined to comment, according to a representative.
The cruise operator’s incorporation articles prevent third parties other than A. Wilhelmsen and Cruise Associates from buying more than 4.9 percent of its stock without board consent, according to its annual report.
In Royal Caribbean’s proxy statement opposing the proposal, the company cited the “increased continuity, depth of knowledge and focus on the long-term” of the present board.
“Things change, I think the view in society of what’s best in corporate governance changes, and we’ve seen similar proposals have resonated with a large number of investors,” not only at Royal Caribbean, Fain said in the interview. He said he didn’t think the chairman and CEO roles would be split.
The Kurtes had pointed to studies showing an association between companies with staggered boards and lower valuations, smaller gains from buyouts, and less linkage between pay to performance.
“A staggered board can entrench management and effectively preclude most takeover bids or proxy contests,” Institutional Shareholder Services said in its report. “All directors should be accountable on an annual basis.”
Some Royal Caribbean directors have served for 20 years or more, said Kurte, who with his father, Harold, owns 1,000 shares.
“They’re overall a well-managed company, but there are certain oversight questions that the board needs to address,” Kurte said before the vote.
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