Report on 2006 Proxy Season

Bill Sjostrom —  9 October 2006

The 2006 Postseason Report, an analysis of the 2006 proxy season prepared by ISS, is now available online (see here). As expected, the big issue was majority voting for the election of directors. According to the report, more that 180 U.S. companies adopted some type of election reform. Most of these companies, however, followed the Pfizer approach and adopted a modified plurality standard described in this post, but at least 40 companies did adopt a true majority voting standard.

Shareholder proposals to install a majority voting standard were voted on at 84 companies during the first half of 2006. These proposals received shareholder support of 47.7% on average. As of August, 36 of these proposals received more than 50% support (13 did so last year). Interestingly, most of the companies at which the proposal received low levels of support had a modified plurality system in place, and most of the companies where the proposals secured more than 50% support did not. Hence, it looks like the pre-emptive strike approach works, i.e., voluntariyly adopting the less onerous (from managements’ perspective) modified plurality to avoid having shareholders force the adoption of majority voting.