As I’ve blogged before (here), a hot issue among shareholder activists this proxy season is majority voting for the election of directors. As mentioned in my previous post, a number of companies have taken a pre-emptive strike approach and voluntarily adopted modified plurality or majority voting standards in an effort to stave off the activists.
Chicago law firm Neal Gerber Eisenber LLP has prepared a survey that lists details about the modified plurality or majority voting standards adopted by 87 companies. Click here for the executive summary and here for the survey.
Related posts:
Sjostrom, Majority Voting for Directors
Sjostrom, Voluntary Adoption of Majority Voting
Update: The new ISS Corporate Governance blog has a post today (click here) speculating whether majority vote proposals on the agenda at several corporations via Rule 14a-8 will receive shareholder approval. The post also notes that the practical difference I identify in my comment below between a real majority vote standard and the Pfizer approach may not be a practical difference afterall–it is standard practice at many companies “to appoint new directors to office before the annual meeting, which would give those new nominees incumbent status.”
RSS - Posts
I will admit that I’m not a fan of social activism in corporate governance. I view it primarily as grandstanding and generally ineffective. Majority vote proposals fall into that category. Even if a director isn’t re-elected, management fills the vacancy on the board, so any real change is unlikely. If institutions don’t like the behavior of management or a board, sell the stock or don’t buy it. If enough investors behave this way and the stock price falls materially, management and the board will notice and take action to bring back the investors. That will effect meaningful change.
One practical difference is that under the “real” scenario, a non-incumbent nominee who does not receive a majority of votes cast would not be elected. As for incumbent nominee’s, you make a good point. I suppose that is why the Committee on Corporate Laws is looking at changing the MBCA to eliminate the holdover issue.
In the two related posts, you seem to favor “real” majority vote proposals as opposed to any of the variants of the “director resignation” approach. In states with statutory “holdover” provisions, there seems to be little practical difference between the two approaches. So why are you so critical of Pfizer and others who have gone with the director resignation approach. It would seem that in states with holdover provisions a company that proposes a majority vote amendment is also just engaging in a public relations maneuver to satisfy the activists.