Corporate Governance Study: Lodging Boards


The hotel/travel industry has been particularly hard hit by COVID. Many of the industry’s venerable brands have had to do the unthinkable, furlough or layoff significant percentages of their workforce. Many executives and even board directors have taken pay cuts during this health crisis. We wonder how this pandemic will impact corporate governance and the tough decisions facing public hotel/travel companies. We have been studying governance practices in the industry for nearly two decades and we have seen huge strides in the quality of board practices. Our study this year examined 56 public lodging companies across five critical areas of corporate governance:

  • Board size and makeup,
  • Committee structure,
  • Related party transactions,
  • Evaluation and shareholder communication,
  • Board and executive pay.

The top performing board in this year’s study belonged to Six Flags Entertainment, scoring an impressive 44 out of a possible 46 points. Extended Stay America and Hilton Grand Vacations tied for second with 43 points, while InterContinental Hotels and Pebblebrook Hotel Trust finished in a tie with 42 points. An impressive performance by these organizations. Each has proxy filing that was thoughtful, thorough, and easy to understand. Just what investors and proxy advisors are looking for. Other organizations such as Travel Zoo, Southerly Hotels, and InnSuites Hospitality Trust have much more work to do but should find plenty of low hanging fruit to improve their overall governance.


In determining the effectiveness of the size and makeup of a company’s board, we looked at six attributes: total number of board members, length of term, the Chairman’s background, the presence of a lead director, ratio of insiders and outsiders on the board, and the board’s diversity policy.

Total Number of Board Members: A board should be comprised of an odd number of members between 5 and 11; a range that most experts consider to be optimal. Over half (30) of the 56 Lodging companies we analysed had board construction that fit into these criteria. That is down from two years ago when 33 – out of 54 – corporations hit our sweet spot.

Length of Term: Having staggered board terms is a governance no-no. Each board director should stand for re-election annually. The only reason to have staggered terms is to prevent proxy battles with investors. Not the best way to build a relationship with the owners of a company. Lodging companies have made progress on this front over the last several years as only eight (8) companies have multi-year terms for their board members.

Chairman Characteristics: Most governance experts believe that the Chairman and CEO roles should be separated. In today’s environment, the Chairman should be independent of the company and a balance to a strong CEO. The separation of powers is a cornerstone of our democracy and it should be the same for public companies. The Lodging Industry has made less improvement in this area as only fourteen (14) companies had a truly independent Chairman. Seventeen (17) of these companies continue to allow the CEO to serve as Chairman of the Board with the remainder (25) have insiders as Chairman, oftentimes founders and/or former CEOs.

Lead Director: When a board allows an insider to be Chairman, they should at least appoint a Lead Independent Director. 38 corporations appointed a Lead Director while eight (8) boards had a CEO or Insider as Chairman without an Independent Lead Director including Hyatt, Hospitality Investors Trust, Expedia, and Trip Advisor.

Ratio of Insiders and Outsiders: Boards should have a super-majority of independent board members. Thirty (30) lodging boards had a super-majority, while only two (2) boards still contained a majority of insiders on their boards – certainly an improvement over the recent past.

Diversity: Companies received points by having a formal policy around gender and racial diversity. Beyond being a social responsibility in today’s environment, it is just good business practice. A diversity of background and opinion can only help in board meetings. Forty-five (45) companies had multiple diversity Board members while two (2) still had zero, a major problem in 2020. Both numbers are a vast improvement from two years ago when twenty-seven (27) companies had multiple diversity board members and nine (9) sat zero diversity individuals.


The SEC requires public companies to have the following four committees: audit, compensation, governance and nominating. The committees should have official charters, no Executive Committee, and be made up of solely independent directors. Just twenty-two (22) companies scored perfectly on all of these metrics.


We continue to see Related Party Transactions taking place. Twenty-four (24) companies still had some form of a Related Party Transaction. This seems like an easy fix, but most continue to do it. Appearances do matter and advisory services such as ISS are not turning a blind eye.


Issues concerning the effectiveness of internal board operations, director evaluation, and accessibility to shareholders were measured in this section. Much like our next section, we like to see companies study the competition to make sure shareholders are happy, feel engaged, and are confident in board strategy. Nine (9) companies scored perfectly in this category, up from five (5) in our previous study.


The final area of our survey is a hot button topic, CEO and Board pay. So much has been made about the inequality of CEO and the average worker. Dodd-Frank regulations now require companies to delineate CEO pay ratios and Say-On-Pay votes. In our opinion the issue is not about how much CEOs get paid, it is about whether they earned their pay. Many of the companies in our survey did a much better job of articulating pay philosophy and being transparent with pay metrics and amounts. Most boards used outside parties to assist in analysing executive and board compensation and overall pay strategies. Investors can argue about the amount executives get paid but they cannot say they are in the dark when in comes to pay. Our attitude has been, “if you have nothing to hind, don’t hide it”. Most boards seem to be heeding our recommendation.