"[The] changes are intended to give stockholders more options to initiate their own action," retired Delaware Supreme Court Chief Justice E. Norman Veasey told Governance Weekly. "I think [the amendments are] significant changes that really at the end of the day put in the hands of the stockholders the ability to make these changes by getting votes from other stockholders."

The DGCL amendments, which were signed June 27 by Delaware's governor, will help mitigate worries over holdover provisions that called for a director to hold office until a successor is "elected and qualified." Those holdover provisions had provided directors a legal footing to reject calls for their resignation when receiving a majority of "withhold" votes, as called for under the Pfizer model.

While investors advocating for majority voting welcome the amendments, the legislation falls short of their demands to change the default standard in uncontested board elections. Moreover, some governance analysts question the overall efficacy of the amendments to give shareholders a greater say in the boardroom.

"It is not clear that the legislation will really impact a major change in corporate governance; let's see what the companies actually do with it," said Rolin P. Bissell, a partner in the corporate litigation and counseling section of Wilmington-based law firm Young Conaway Stargatt & Taylor, which helped shepherd the amendments through the Delaware legislature. "It seems to us that efforts to re-invigorate proxy fights by reducing their cost and that sort of thing will probably provide a more meaningful increase in stockholder power than majority voting."

With Delaware behind them, proponents of majority voting are now focusing on legislative efforts in Sacramento to create a default majority vote standard. A bill to do just that for all companies incorporated in California is now moving ahead in that state's legislature.

"We are hopeful that we can get it passed still in this legislative session and signed into law," Brad Pacheco, spokesman for the California Public Employees' Retirement System, told Governance Weekly. The pension fund, the nation's largest, is backing the legislation, which was introduced in January by Senator Richard Alarcon, a senior Democrat.

Strong Showing in 2006
So far this year, majority vote proposals filed by shareholders have won more than 50 percent support at 32 companies (or 38 percent) out of 84 firms where the issue has appeared on the ballot and results are available. In 2005, 14 shareholder proposals (or 23 percent) at about 60 firms received majority backing. This year, the average level of support stands at 46.9 percent, up from 43 percent a year ago, according to ISS data.

The lowest support this season occurred at General Electric (19.4 percent), which adopted a bylaw with a strong director resignation policy. Proposals also did not receive wide support at Wal-Mart (22.3 percent) and PepsiAmericas (27 percent), where there are large insider voting blocks.

Majority vote proposals by the United Brotherhood of Carpenters and other building trade unions have been withdrawn at more than 30 companies this year, primarily because these firms voluntarily adopted a majority standard in their bylaws along with a resignation policy for incumbent directors who fail to get more than 50 percent support.

Last month, Chubb announced that it would begin the process of amending its certificate of incorporation to include a majority voting clause after a shareholder proposal received 52 percent support in April. At Granite Construction and Target, shareholders withdrew proposals after board promises to introduce management resolutions in 2007. The boards of eight other firms, including Principal and fellow financial services group Hartford, have resolved to establish majority voting by amending company bylaws in 2007.

ABA Model Act Revision Endorses Resignations
Last month, the American Bar Association officially amended the Model Business Corporation Act, which is the basis for the corporate laws in most U.S. states, to include a provision for ousting a director in 90 days or fewer if he or she receives more than a 50 percent withhold vote. That provision is similar to the resignation policies in place at Pfizer and other firms, but it standardizes the 90-day window for replacing directors.

"I think they went a lot further than a lot of people thought they'd go," University of Delaware law professor Charles Elson said in June.

The moves by the ABA and Delaware lawmakers won't stop activists from pushing for deeper board election reforms, governance analysts say, leading many to predict growing investor support for such proposals later this year and next.

"Companies should expect continued significant pressure from institutional investors and shareholder activists on this issue in the next proxy season," Martin Lipton, a senior partner at Wachtell, Lipton, Rosen & Katz, told Governance Weekly, echoing sentiments he raised in a memo to clients.