Opportunities remain as hospitality industry lags in board diversity, cyber security, CSR and succession planning.
NEW YORK – New trends in the board room are emerging, according to AETHOS Consulting Group‘s 2015 Study of Corporate Governance in the Lodging Industry. “We have seen great improvement in many key areas of corporate governance,” explains AETHOS Managing Director and CEO Keith Kefgen. “Unfortunately, we continue to see a few companies with classified boards, little diversity, questionable independence, and even holding back as it relates to more performance- based compensation.”
“And newer concerns have developed,” adds Georgianne Fsadni, AETHOS Director based in Melbourne, Australia, who co-authored the report with Kefgen. “The three key issues which may drive change are succession planning, corporate social responsibility and issues of (cyber) security.”
- Succession Planning
- Corporate Social Responsibility
- Security
Of the 26 hospitality related companies and REITS studied, not one group scored perfectly with respect to size, makeup and independence of the Board due to one of the following: an even number of board members, the chairman and CEO functions not being separated, too many insiders on the board, a classified board (terms of greater than one year), and finally, the lack of a formal diversity policy.
Fsadni observes, “Six out of the 26 boards surveyed do not have a woman on the board.”
AETHOS 2015 Lodging Board Performance Survey Results
- Although not part of the formal evaluation this year, it was noted when reviewing the 2015 Proxy Statements, that less than half mention succession planning in any meaningful manner. Five mention sustainable practices, and only three mention cyber security responsibilities.
- Congratulations to Priceline this year, who scored 40 out of a possible 45 points, and DiamondRock, Sunstone and Ryman who followed closely.Yet the need for more effort in the articulation and monitoring of a board diversity policy was a common weak link.
- As a comparison, AETHOS analyzed two Fortune 500 companies that recently won governance awards. PepsiCo received the award for Exemplary Shareholder Engagement at the New York Stock Exchange (NYSE) Governance Services’ 2015 Governance, Risk & Compliance Leadership Awards. Although Pepsi was strong in this area, AETHOS analysis determined that their board is too big, that their CEO is also Chairman, and they had some Related Transactions. Interestingly, Pepsi would have scored 36 in the AETHOS study.
- Navient won the Best Board Diversity Initiative award in the same NYSE program. While this is commendable, they have many of the same issues as Pepsi. Navient would have also scored a 36 in the AETHOS study. While the scores are strong, neither are better than the Lodging Company top performers.
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She holds a Bachelor's degree in Communication & Mass Media from Panteion University of Political & Social Studies of Athens and she has been editor and editor-in-chief in various economic magazines and newspapers.
