Dallas Business Journal Writes


The company said in a prepared statement to Dallas Business Journal that its classified board structure was recommended while still a trust by the Conversion Exploration Committee. The committee was made up of trustees and investors, most of whom became board members. “The structure is intended to provide stability and continuity to ensure a smooth transition from a trust structure to a c-corporation, and to enable TPL Corporation to attract and retain highly qualified directors who have a focus on the long-term objectives of the company,” a Texas Pacific spokesperson said in a prepared statement to Business Journal.

Tim Schwartz, whose firm Schwartz Investment Counsel owns an almost-1% stake in Texas Pacific, said he was glad when the trust converted to a corporation. “I think that was a huge positive for the company,” Schwartz said. “But since then, I would say there’s been not as much progress as we would have hoped in terms of the corporate governance. And to us, it feels like the board is not that conducive to additional corporate governance improvements. The actions they’ve taken over the past few weeks, that just solidifies that opinion.”

James Spindler, the University of Texas at Austin Mark L. Hart, Jr. Endowed Chair in Corporate and Securities Law and a professor at the McCombs School of Business, said implementing a classified board like Texas Pacific’s can be controversial. Classified boards can entrench directors, protecting them from removal in hostile takeovers or proxy battles — like the one Texas Pacific faced two years ago. 

“There’s a general concern among reformers and activist investors, and I think in the larger corporate communities, that classified boards have some negative consequences,” Spindler said. “(They) tend to entrench management. So if you have management that’s making bad decisions, or making self-interested decisions, it’s a lot harder to kick them out.” Harvard Law School professors Alma Cohen and Director of the Program on Corporate Governance Lucian Bebchuk — experts on corporate governance — found through research that there’s a correlation between classified boards and “an economically meaningful reduction in firm value.”

10 thoughts on “Dallas Business Journal Writes

  1. There is a lot of $$$ to be made with TPL. Unfortunately, it won’t be the common shareholder making it.


  2. I just purchased the article in a shareable format so that readers of the blog and my twitter account can access the full article behind the paywall.

    -Gabi Gliksberg
    ATG Capital Management

    Liked by 1 person

  3. Yeah, there is no surprise here for any of us that have followed this story. Every action the former trustees have taken: cancelling elections, lawsuits, classified board, handpicked board members- has been intended to protect their ever more lucrative positions. There is no doubt that the former trustees and their handpicked cronies need to be gone before we get good governance. The only question is what is the fastest path to get there?

    Liked by 1 person

    • As with others, the Investors Relations VP got in touch with me today. A response to my letter of the 24th. I asked for clarification on what fraction of outstanding shares are currently obligated by the governance rules to vote for board recommendations, and urged Shawn to convey my desire for the Gliksberg proposal to be considered. I’m not holding my breath on the response, but then again I live at 8000ft and i can’t hold my breath anyway.

      Liked by 1 person

      • Just an endnote to my communications with Investor Relations. They responded to my asking for simple clarification about how many votes (%age)m are currently obligated under the governance rules regarding board members as “for” board recommendations, I was told it was “complicated” and given some links to read. Scientist not a lawyer, and man lawyers write confusingly.

        Which is why I asked Investor Relations to help. I am a little worried that “Investor Relations” means as an Investor I am getting f&&$d. Good thing this is an oil company.

        Liked by 1 person

        • So Shawn of Investors Relations fame got back to me today and was helpful. Depending on the issue before the board, HK (or any entity controlled by a board member) appears to be obligated to vote for the board recommendation per the shareholder agreement. That means that roughly 25% of all eligible shares are voting in the affirmative on some issues. Maybe other folks already knew this.

          So it is a big hill to climb if non-insiders are against that particular issue. Gotta give credit that Shawn was helpful, if a little irritated (understandable) at my badgering.

          Tomorrow I will be fox, promise…..


Comments are closed.