Post by
merriam on Feb 20, 2022 2:06pm
On Removing Directors
Removing/replacing directors is not simple. Before the annual meeting, your broker sends you a management proxy. Note that it has no option to vote against a director, only to vote for or to withhold from voting. In the past, that wording used to almost guarentee that a director could not be removed using a managaement proxy.
In recent years, public companies, including LREIT, have adopted majority voting policies. I believe that, in LREIT's policy, if a majority of the unitholders withhold voting for a director, then that director must tender their resignation. But what happens after that is anyone's guess.
LREIT's policy states that "The Board will promptly accept the resignation unless the Governance, Compensation and Nominating Committee recommends to the Board that there are circumstances warranting that such Trustee continue to serve as a Trustee" (LREIT information circular, May 21, 2021, p. 20). Such warranting circumstances might include a period of financial uncertainity for the REIT, which, they might argue, requires board stability.
In other words, the committee/board has the option to reject the resignation and keep the director or, if not, to appoint a replacement director who is equally committed to protecting entrenched insider interests.
A more certain way to make board changes would be for a dissident group to call a special meeting, issue dissident proxies and a dissident information circular that proposes a fresh slate of directors.
Also, in the case of our trust, I seem to recall that a majority of unitholders can replace board members simply by signing a decree to that effect. That would be simplier and faster than a special meeting, but would require coordination and legal advice.
(Disclaimer: all of the above is only opinion and is offered for discussion purposes only.)