In a May 1 news release, labor union Unite-Here encouraged Penn Entertainment shareholders to support a proposal that will be considered at the June 16 Penn shareholder meeting. The motion would change Penn’s board terms from staggered to parallel.
Penn has a “classified” board, meaning that its board members fall into three classes with overlapping terms. Unite-Here would scrap that arrangement in favor of simultaneous elections for all board members.
Sixteen years ago, according to the union, Penn shareholders voted to declassify the board, but Penn took no action. It notes that declassification of corporate boards in general has become more popular, citing shareholder plebiscites at 14 other companies. “Today, maintaining a classified structure places Penn increasingly out of step with shareholder preference,” wrote Unite-Here Director of Gaming Industry Research Michael Hachey in the press release.
Hachey raised the issue of uncertainty in the gaming industry, invoking the specters of prediction markets, igaming growth, sweepstakes gambling, and “skill” games. He noted that the Penn board would retain the discretion to declassify or not.
The Unite-Here official then strove to rebut a number of Penn’s defenses. Hachey said that Penn claimed “extensive regulatory review and licensing of directors” would hinder its ability to attract talent. He pointed out, however, that MGM Resorts International, Boyd Gaming, Caesars Entertainment, and Full House Resorts all have non-staggered boards and all operate in Nevada.
Another Penn defense is the size of its imprint in the industry, which it claims is the largest: 42 casinos and racinos spread across 19 states. However, Caesars’s footprint is, according to Hachey, arguably larger, with 52 casinos and tracks in 18 states, plus an extensive igaming presence.
Penn, Hachey contended, “does not explain why its regional footprint would be more of a hindrance to holding annual elections than Caesars’s regional footprint.” (A telephone call to Penn seeking comment was not returned by press time.)
In its defense, Penn has argued, “More significantly, certain of our jurisdictions, each of which is important to our operations, require directors to obtain licensure before they are permitted to vote on Board matters.” Hachey rebutted that MGM, like Penn, operates in Michigan.
The Wolverine State demands that board members “shall not perform any duties or exercise any powers of the position related to Michigan operations until he or she has been determined to be qualified or licensed, or both, or otherwise authorized by the board, under the act and these rules.” Hachey queried why MGM’s directors could meet this requirement, while Penn’s could not.
Penn has argued that its classified/staggered board structure lends stability. To this, Hachey responded, “The widespread adoption of annual elections across large-cap companies, including in capital-intensive, highly regulated industries, demonstrates that annual elections and long-term thinking are not mutually exclusive. Directors elected annually are still experienced, accountable, and fully capable of overseeing multi-year strategic initiatives.”
Concluded Hachey, “It is time to align Penn’s governance with modern standards of accountability.” He urged shareholders again to support the motion, adding that this was not a proxy-vote solicitation and any proxies sent to Unite-Here would be ignored.
