The Case Against Mandatory Annual Director Elections and Shareholders’ Meetings

Bill Sjostrom —  15 June 2006

I’ve recently posted on SSRN my latest draft article entitled The Case Against Mandatory Annual Director Elections and Shareholders’ Meetings. Here’s the abstract:

The article examines the mandatory requirement under state corporate law and stock exchange listing standards that public corporations hold annual shareholders’ meetings for the election of directors. Specifically, I question the value of requiring corporations to (1) elect directors annually, and (2) hold shareholders’ meetings annually. I critique the various justifications for these requirements and find none of them persuasive. I then explore a different approach taken by Minnesota corporate law with respect to the frequency of director elections and shareholders’ meetings and conclude that the approach is superior to the current scheme. Recognizing, however, that any less strict state approach is overridden by exchange listing standards requiring annual elections and meetings, I propose that these listing standards be abolished. This would give effect to the Minnesota approach, but more importantly, it would allow state “laboratories� to experiment with alternative rules with respect to the frequency of elections and meetings. Consequently, it would add another variable for consideration in connection with the various proposed corporate governance reforms (e.g., shareholder proxy access, proxy contest reimbursement, majority voting) under debate, some of which may impact the propriety of annual director elections and shareholders’ meetings.

You can download the article here. It’s relatively short for a law review article (44 pages; 18,500 words), so it should be a quick read. If you do read it and have comments, please email them to me at sjostromw(at)nku(dot)edu.