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Howard Stutz

Firms Back Union Push

10 May 2005

A pair of independent advisory firms that offer proxy voting suggestions to institutional shareholders has recommended favorable votes on three union-backed proposals that would change the corporate governance structure at Station Casinos.

Company shareholders are considering three changes in the bylaws of Station Casinos backed by Culinary Local 226, a UNITE HERE affiliate that owns about 260 shares of the company's stock. Voting results will be announced at the company's annual shareholder meeting May 18 at Green Valley Ranch Station.

Under the suggested changes, the union is asking Station Casinos to adopt a simple-majority voting plan rather than require a supermajority of shareholders; require that members of the board of directors be elected annually; and let shareholders vote to keep or reject the company's "poison pill" anti-takeover device.

Two independent investor advisory firms -- Institutional Shareholder Services and Glass Lewis & Co. -- issued recommendations last week in support of the union's proposals.

"These companies perform this service independently for institutional investors," Chris Bohner, a UNITE HERE research director, said Monday. "This is done independent from the company or the shareholders offering the proposals, so, we are obviously pleased with the recommendations."

Institutional Shareholder Services, based in Rockville, Md., describes itself as "the world's leading provider of proxy voting and corporate governance services, serving more than 950 institutional and corporate clients."

Loren Schafzin, a Glass Lewis spokeswoman, said the San Francisco-based firm advises clients with more than $8 trillion in assets.

"We try and help institutional investors make a more informed decision on proxy matters and proposals," she said.

Station Casino Chief Financial Officer Glenn Christenson said he was familiar with the two advisory firms, but said the company's corporate governance bylaws were no different from other gaming companies'.

"It's kind of a dual standard by the union," Christenson said. "Most of the companies the union has contracts with have the same corporate language the union wants us to change."

Station Casinos, which is nonunion, has been fending off attempts by the Culinary to organize the company's work force for several years. The proposed bylaw changes have been seen as aggressive moves by the Culinary.

The firms supported the three union proposals for varying reasons.

In its report, Institutional Shareholder Services said it generally supports a simple majority vote for changes in both corporate governance and major transactions.

"Requiring a higher voting threshold could permit management to entrench itself by blocking amendments that are in shareholders' best interests," the advisory firm stated in its 21-page report.

Both firms backed annual elections for shareholders.

"Glass Lewis ... believes that the annual election of directors provides maximum accountability of directors to shareholders and requires directors to focus on the interests of shareholders," the company wrote in an 18-page report. "Shareholders also appear to share a strong aversion toward staggered boards."

The union's proposal to allow shareholders to vote on the company's poison pill provisions also gained the backing of both firms.

Christenson said poison pills were popular several years ago and protected companies against corporate raiders. He said they still have value, citing last year's $10.3 billion buyout of PeopleSoft by Oracle that shook up the software industry.

Oracle had originally offered much less than the final purchase price of $26.50 per share. Christenson said that PeopleSoft's poison pill forced Oracle to increase its offer, giving company shareholders more value.

"I think there is some merit to our poison pill provision," Christenson said.

The advisory firms disagreed with his assessment in their reports.

"(Station Casinos') rights plan was not approved by shareholders nor does it embody the ... features that (we) recommend. The pill has a trigger of 15 percent and does not have a qualified offer clause or an independent director evaluation provision," wrote Institutional Shareholder Services.

Glass Lewis stated it, "believes that, in general, poison pills are not conducive to good corporate governance. Specifically, they can reduce management accountability by substantially limiting opportunities for corporate takeovers."

Culinary leaders hope the firms' recommendations will help their cause.

This is the second time the Culinary has tried to institute changes during Station Casino's annual shareholders meeting. In 2003, the union unsuccessfully challenged the extension of Station Casinos' stock compensation program. Company shareholders voluntarily changed the compensation program a year later.

Last year, the union and the Sierra Club funded a flier opposing Station Casinos' plans for a 300-foot tower for its Red Rock Station casino. Clark County commissioners approved a tower of 198 feet.

Firms Back Union Push is republished from