Cumulative Voting for Directors

Cite this Article
Bill Sjostrom, Cumulative Voting for Directors, Truth on the Market (January 19, 2006),

While working on my last post, I discovered that Hewlett-Packard’s certificate of incorporation provides for cumulative voting in the election of directors. This made me curious as to how many other public companies have cumulative voting so I googled it. I came up with this article which says about 10% of the companies in the S&P 500 have cumulative voting.

Cumulative voting has absolutely no impact on an uncontested election. It could, however, impact a contested election because it reduces the minimum number of votes an insurgent must secure to get at least one director on the board. But as argued strenuously by opponents of the SEC’s failed shareholder access proposal, i.e., big business, a board with insurgents is likely to become politicized and balkanized to the detriment of shareholders. Why then would companies like HP provide for cumulative voting (assuming they are not forced to through a Rule 14a-8 proposal)? My perhaps cynical guess is that they view the very low risk of a contested election being impacted by cumulative voting (according to this paper during the period of 1996-2004 there were on average only two contested elections per year at companies with market caps in excess of $200 million) as outweighed by the public/investor relations benefit of having cumulative voting. As HP recently stressed to the SEC, cumulative voting “is viewed as stockholder-friendly� and “gives stockholders a meaningful role in the election of directors.� Also note that the influential Institutional Shareholder Services (ISS) generally supports cumulative voting (see here).