UNION CITY, Tenn.—Titan International Inc. shareholders have 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 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 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.