Small investor in MGM Resorts advocates removal of board members

An investment manager with a less than 1 percent ownership position in MGM Resorts International stock is advocating the removal of four members of the board of directors.

Stamford, Conn.-based Land and Buildings plans a conference call and will issue a public presentation today explaining why it believes “there is an urgent need for change” for the Las Vegas company, the state’s largest private employer.

It’s the second instance of potential board upheaval for a high-profile publicly traded Las Vegas casino company this year. Last week, Wynn Resorts Ltd. successfully lobbied shareholders to oust Elaine Wynn from the company’s board of directors.

In this proxy fight, MGM has gotten out in front of a shareholder proposal that includes a plan to remove Robert “Bobby” Baldwin, Alexis Herman, Roland Hernandez and Rose McKinney-James from the board.

Land and Buildings founder and Chief Investment Officer Jonathan Litt, who has 22 years of experience as a global real estate strategist and investor, has said in television appearances and in letters to MGM shareholders that the company “has a history of poor investment decisions” and that “the board continues to make the same capital-allocation mistakes.”

MGM issued a letter to shareholders in advance of Land and Buildings’ presentation explaining why the company needs to maintain its present course of corporate governance.

“Your board and management team are focused on continuing to drive above-industry-average shareholder returns through the development, implementation and execution of a multifaceted strategic plan,” the company said in its letter to shareholders. “This strategy has already enabled MGM to deliver 105 percent total shareholder returns over the past three years and put the company on a sustainable growth trajectory.”

The company cited its development of MGM Cotai, a new project in Macau, projects in Maryland and Massachusetts, a 350,000-square-foot expansion of the Mandalay Bay Convention Center and a room remodeling project at that property, a new park and entertainment district between its Monte Carlo and New York-New York properties and the 2016 opening of the 20,000-seat MGM Resorts International-Anschutz Entertainment Group arena as examples of its investment growth program.

“The board has thoughtfully allocated capital by enhancing existing properties and has also supported trendsetting capital-light partnership strategies,” the company’s letter said. “The capital investments the company is currently making will ensure long-term value creation. We believe L&B’s assertion that we stop making those investments in the company’s future is completely unsupportable.”

Litt has been critical of MGM’s diversity initiatives, noting that they don’t enhance shareholder value.

MGM countered that Baldwin, Herman, Hernandez and McKinney-James make “extremely valuable contributions to our board.”

Baldwin is president and CEO of the company’s CityCenter joint venture, Herman is a former Labor secretary in the Clinton administration, Hernandez is former chairman and CEO of the Telemundo Group and is a director of Vail Resorts and McKinney-James has held several business and government posts, including serving on the Nevada Public Service Commission and was a former director of the Nevada Business and Industry Department.

“L&B is evidently unaware of, or deliberatively chooses to disregard, the fact that MGM operates a global business and faces a variety of complex issues that require diverse perspectives,” the company said in its letter. ”It is paramount to have directors who have a fundamental understanding of our clients, customers and vendors in order to succeed.”

MGM’s annual meeting is scheduled for May 28.