REIT Governance Keeping Up with Influence of Institutional Shareholders, Hanks Says

Jim Hanks, a partner at Venable LLP who specializes in corporate governance, joined REIT.com for a video interview at REITWise 2016: NAREIT’s Law, Accounting and Finance Conference at the Marriott Marquis in Washington, D.C.

One of the most prominent corporate governance issues pertaining to REITs today is the increased influence of major institutional shareholders, according to Hanks.

REITs have to be particularly sensitive to their relationships with their major shareholders, Hanks said. He noted that a concentrated group of sophisticated institutional investors exists in the REIT industry today, which REITs have had to be mindful of. “They are doing a good job,” he observed.

Hanks also commented that as proxy advisors have become increasingly significant, institutional shareholders themselves have developed their own proxy voting policies and corporate governance guidelines.

“Now, it’s not enough to just be sure that a REIT is following what [proxy advisory firm Institutional Shareholder Services] wants to do because that may not be enough for a lot of institutional investors,” Hanks said.

Proxy access has become a major issue within the last year, according to Hanks.

“People are arriving at the conclusion that there’s really no reason not to adopt proxy access,” Hanks said. He added that he does not expect proxy access to be widely used, however, because significant stockholders or activists who want to attempt at control of a company’s board of directors will do so in their own proxy statement. “They’ll fight their own campaign,” Hanks said.