UNION CITY, Tenn.—Titan International Inc. shareholders approved a proposal at the firm's recent annual meeting to reincorporate the company in Delaware and approved a move by a shareholders' group to “declassify” the company's board.
The shareholders voted overwhelmingly—by a 98-percent majority—for reincorporation, a move Titan argued will allow it to take advantage of Delaware's “comprehensive, flexible corporate laws responsive to the legal and business needs of corporations.”
Titan said it expects the legal and regulatory process for reincorporating to be “relatively short with completion expected within 30 days.” The company said it expects “little quantifiable” financial benefits from the move, which it stated earlier is being undertaken to take advantage of Delaware's more business-friendly legal atmosphere.
The vote to declassify the board—an initiative sought by the California State Teachers' Retirement System (CalSTRS) and opposed by Titan—means directors from now on will serve one-year terms instead of staggered three-year terms.
CalSTRS, which describes itself as the world's largest educator-only pension fund in the world and a Titan shareholder, argued that Titan has underperformed its peer group and the market in general and that greater board accountability “will facilitate better performance going forward.”
In its proposal sent to Titan shareholders on May 18, CalSTRS showed that Titan had underperformed in both ROIC and EBITDA margin vs. its peer group over one-, three- and five-year periods by considerable margins.
In its proposal, CalSTRS cited work by Harvard Law School researchers that shows a staggered board had negative implications on company performance.
“It is intuitive that when directors are accountable for their actions, they perform better,” the pension fund noted.
CalSTRS—which manages more than $191 billion in assets—holds more than $2,000 in Titan stock, according to Titan's proxy statement.
In its proxy statement prior to the annual meeting, Titan argued that its board “consists of individuals who possess specialized talents and knowledge—finance, engineering and marketing experience—that are vital to Titan's success. The board believes that electing directors for one year is detrimental to Titan and its stockholders because Titan's business is tied to cyclical markets that require long-term vision and planning, which could be undermined by potential annual changes to the board composition.”
At the meeting, shareholders also re-elected Anthony L. Soave, president and CEO of Soave Enterprises L.L.C., as a director to join the sitting board, which consists of: Richard M. Cashin Jr., Gary L. Cowger, Albert J. Febbo, Peter B. McNitt, Dr. Mark H. Rachesky; and Titan Chairman Maurice M. Taylor Jr. Mr. Soave has been a director since 1994.
Titan held its annual meeting at the former Goodyear tire plant in Union City that it bought in 2011.