Shareholders of CommonWealth REIT forced the resignation of a trustee on the company’s board, Joseph Morea, by failing to give him a majority of votes. Undaunted by this rare binding vote by shareholders to force out a board member, the other membesr of Commonwealth’s board simply voted Mr. Morea back into his board seat the very next day.
CommonWealth’s bylaws required Mr. Morea to resign because he did not get a majority of votes. However, the bylaws apparently didn’t specifically prohibit the director from being reappointed AFTER resiging. CommonWealth’s board stated that the shareholder vote resulting in Mr. Morea’s resignation “appeared not to be directed at any personal failings…but rather to be the result of the positions taken by the board to oppose the hostile takeover efforts.”
Some CommonWealth shareholders have also complained that the company’s fee structure is rife with conflicts of interest that have led to poor performance, and one analyst has argued that CommonWealth’s management fee structure encourages the company to concentrate on growing its assets as opposed to improving rents and vacancy.
CommonWealth’s management has taken a series of defensive moves to stave off activist shareholders, including changing company bylaws to make it more difficult for investors to vote out the board. The company also reportedly lobbied–unsuccessfully–for a change in Maryland law that would have made a hostile takeover more difficult.
If you received misleading statements regarding non-traded REITs, were not made aware of the risks associated with non-traded REITs or your financial professional recommended the investment despite the fact that it was unsuitable for you, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 for a no-cost, confidential consultation.