Gliksberg Public Letter

Things are heating up before the meeting this week! In the course of writing this blog I have spoken to many TPL investors. The letter linked above crystalizes the thoughts of the VAST majority of folks with whom I speak.

I was unaware of the conclusion of Glass Lewis on #8 until I read Gliksberg’s letter. If this proposal doesn’t pass this year it now has serious legs going into 2023. (Assuming #4 doesn’t pass and we don’t all get cut in half)

My Proposal 8 is intended to improve corporate governance at our Company, as explained more fully in my supporting statement in the Schedule 14A. Horizon Kinetics and SoftVest are large stockholders with real economic stakes in TPL’s success. According to the Schedule 14A, Horizon Kinetics alone owns almost 20% of TPL. Yet, the Stockholder’s Agreement ties these entities’ hands and prevents them from acting with the same freedom a typical stockholder has. For example, as long as these stockholders’ designees are on the Board, they cannot (a) freely vote their shares (instead they often must vote lockstep in favor of Board recommendations), (b) nominate candidates for election to the Board, transact in TPL’s voting securities above a defined beneficial ownership threshold, inspect TPL’s books and records, or propose certain changes to TPL’s business or management, (c) make any statement about TPL and related persons that “undermines, disparages or otherwise reflects detrimentally” on such persons, or (d) initiate legal proceedings against TPL. The effect of these restrictions is to give the Board the power to control the decisions of an enormously influential percentage of shares on many significant corporate matters. In my view, this is a mechanism whose sole purpose is director entrenchment, and I do not believe that such restrictions are justified. They merely stack stockholder votes on many key issues in favor of whatever result a majority of the Board wants, even if Horizon Kinetics and/or SoftVest actually oppose that result.

Glass Lewis, one of the premier Proxy Advisory firms, opined that shareholders should vote FOR Proposal 8, and their report makes the case better than my words can. They state: “in light of the positive governance changes and other improvements that these stockholders catalyzed …we believe the most appropriate and shareholder-friendly approach at this juncture would be to release the two Horizon and Softvest designees from their obligations under such agreement. In our view, although these shareholders currently have representatives on the board, we believe they, like any other shareholder, should generally be free to vote their shares how they see fit in line with their own interests and perspectives on the best direction for the Company”.

Let’s be clear: if not for the actions of Horizon Kinetics and Softvest in their 2019 proxy fight, there would not be regular Board elections or even an annual shareholder meeting. They have skin in the game, they are long-term owners, and they have repeatedly proven to be more interested in sincere corporate governance than the former trustees.

Proposal 8 is non-binding, but if it passes, the Board will become keenly aware of how shareholders feel about this issue, and will have the option of immediately fixing this deficiency in TPL’s governance. If the Board ignores stockholders’ expressed wishes, that lack of responsiveness could alienate the major proxy advisory firms and have implications for next year’s Board elections. Further, if Horizon Kinetics and SoftVest vote against Proposal 8 (logically, that would only occur if their obligations in the Stockholders’ Agreement forced them to), then an intelligent Board member would net out that voting block to understand where shareholders really fall on the issue. I am voting yes on Proposal 8, and I encourage your support as well.

2 thoughts on “Gliksberg Public Letter

  1. I got chills reading Gabi’s persuasive and informational letter to shareholders. He makes great points, of course, about the merits of Proposal 8 that he got added to this year’s proxy. Clearly, his proposal is aimed at lessening/eliminating the restrictions the Shareholders Agreement imposes on Stahl and Oliver to vote in lockstep with the Board’s recommendations. What I don’t think any of us completely understand is where there is gray area to vote as they choose. In their opposition to the proposal, the authors describe below, let’s hope Proposal 4 fits into the “extraordinary transactions” and “the most material matters” territory!

    For example, the voting and commitments provision (Section 2) requires that the Investor Group votes their shares in accordance with the Board’s recommendations while also allowing the Investor Group discretion with respect to extraordinary transactions and certain governance, environmental or social matters. The provision ensures that matters determined to be in the best interest of all stockholders by the Board are not unduly hindered by the Investor Group without limiting how the Investor Group may vote their shares on the most material matters.

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