ARLINGTON, Va. -- Shareholders of Marriott International Inc. rejected the company's new dual-class stock structure in a vote at the company's annual meeting yesterday.
The plan had created two classes of stock -- one with one vote per share, another with 10. Marriott had argued that a dual-class stock would enable it to grow through mergers more easily.
But a union and several pension fund groups opposed the plan because, they said, it would allow the Marriott family to accumulate the higher-voting shares and sell common shares, while giving up little voting power.
The opposition also said the structure would protect the Marriott family from unwanted takeovers.
The Marriott family holds almost a 20 percent stake in the company, which has about 253 million shares of its common stock outstanding.
"I'm disappointed by this result, but not devastated," J. W. Marriott, the company's chairman and chief executive, told shareholders. "We've been without a dual-class structure ever since we went public in 1953."
"This vote in no way diminishes our faith in this company," Marriott said after the annual meeting.
"We will continue to grow the business aggressively."
The dual-class structure actually got a majority of the shareholder votes cast, but only 47 percent of all outstanding shares, the company said. The proposal needed 51 percent of all outstanding shares to pass.
Stock rises to $35.5625
Wall Street responded to the vote by sending Marriott's stock up $1.875 a share to $35.5625.
Desmonde Printz, a senior analyst with Proxy Monitor, a New York-based research and proxy voting agency for institutional investors, said there are quite a few companies with dual-class stock, but the plan would not have benefited Marriott shareholders.
"There's definitely a lot of truth to Marriott's argument that the dual-class stock would give them greater flexibility for acquisitions," Printz said.
"Marriott exists in an industry where it must compete with REITs that have much more room to finance acquisitions. But the dual-class stock would have also given the Marriott family an opportunity to manipulate the stock.
"It could have been a benign concern, but there was no way shareholders could be assured the Marriotts wouldn't use it for their own control."
The vote to convert the stock structure means that the only class of Marriott International stock will be Class A common.
The shares were adjusted today before the stock market opened. The newly unified Class A shares will trade under the common stock's current ticker of MAR.
The dual-class stock plan took effect in March, when Marriott International spun off from the Marriott food services business. For each Marriott share, investors got two Marriott International shares -- one share of common stock and one super-voting Class A share. The food business combined with the U.S. business of (( France's Sodexho Alliance S.A. to become Sodexho Marriott Services Inc.
Marriott agreed to put the controversial dual-class stock structure to a separate shareholder vote at yesterday's annual meeting.
The opposition groups were heartened by the result.
"Pressure brought by institutions like [ours] was realized today in the victory," said Brad Pacheco, spokesman for the Sacramento, Calif.-based California Public Employees' Retirement System pension group.
"We sent a clear message to Marriott that we want an equal and fair stock structure," he said.
The pension fund system for city employees of New York also opposed the dual-class stock structure.
Matthew S. Walker, research director for the Washington-based
Hotel Employees and Restaurant Employees International Union, said the shareholders' response to the proposal was unprecedented. The union owns shares in index funds, mutual funds and 401(k)s for Marriott employees.
'Depth of outrage'
"We had the uphill fight, but there was a depth of outrage over the Marriott family's grab for control," Walker said.
"They were trying to treat us like this is some family business that we are lucky to be a part of. It was wrong."
In other news, Bethesda-based Marriott announced that its quarterly dividend will increase 11 percent to 5 cents per share of common stock, payable July 17.
The company also approved the buyback of an additional 10 million shares of its common stock.
Marriott has repurchased about 2.8 million of its shares since March, and now has the authority to buy back an additional 17.2 million shares.
Pub Date: 5/21/98