2007 Preview: Board Elections
Submitted by: Rosanna Landis Weaver, Manager, Taft-Hartley Research
As of Jan. 1, ISS is tracking almost 450 governance-related shareholder resolutions for the 2007 proxy season. The issue of majority voting in director elections will again feature prominently, based on the number of proposals filed to date as well as momentum gained from support of such measures in recent years.
However, companies have shown an increased willingness to adopt majority voting bylaws and policies, prompting several union pension funds to withdraw resolutions and actively engage with other issuers to reach agreements. In the past six weeks, more than 25 firms have adopted majority voting or announced plans to do so.
In addition, proxy access--the proposed, tabled, litigated, and much-debated suggestion that shareholders meeting certain requirements be allowed to nominate a limited number of corporate directors--will likely appear on a few proxies this year after the American Federation of State, County, and Municipal Employees (AFSCME) successfully challenged the exclusion of an access proposal.
The topic that dominated last year's proxy season--calls for director elections by majority vote--will likely feature just as prominently in 2007. In 2005 and 2006, activist investors pushed for companies to allow for majority voting after the SEC abandoned a 2003 draft rule designed to give investors greater say over director nominations.
Since then, activist shareholders have become so focused on gaining more influence over corporate boards that the most frequently filed proposals last season and in 2005 were those asking boards to provide that director nominees in uncontested elections be elected by "the affirmative vote of the majority of votes cast at an annual meeting of shareholders."
According to ISS records, shareholders filed 84 majority election proposals that came to a vote in the first half of 2006. This compares with 54 proposals that came to a vote in the first six months of 2005, and 12 in 2004. For the first half of 2006, shareholder support for these majority vote proposals averaged 47.7 percent (compared with 44.3 percent during the first half of 2005). And by August 2006, 36 proposals had received more than 50 percent support, nearly triple the number in 2005. In 2004, these proposals averaged less than 12 percent of votes in favor, without a single proposal winning a majority.
Building trades funds led by the pension fund for the United Brotherhood of Carpenters and Joiners of America filed most majority vote proposals in 2005 and 2006. And labor funds, such as the Carpenters, will again spearhead efforts on this issue in 2007, having so far filed roughly 100 such proposals, with an additional 10 submitted by individual investors.
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Friday, July 14, 2006 |
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Legislation to Spur Majority Vote
Submitted by: Tad Kopinski and L. Reed Walton, Staff Writers
Lawmakers in Delaware, where most U.S. companies are incorporated, have amended the state's General Corporation Law (DCGL) to facilitate majority voting in director elections, but they stopped short of switching the law's default standard from plurality to majority.
The legislation, which goes into effect Aug. 1, makes clear that director resignation policies--which have been adopted by pharmaceutical giant Pfizer and more than 100 other firms--are enforceable under Delaware law. The new law also mandates that directors cannot overturn or alter shareholder-approved bylaw amendments that spell out vote requirements in director elections.
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Wednesday, July 5, 2006 |
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Discussion: Majority Voting for Directors
Submitted by: Cheryl Gustitus, Senior Vice President, Marketing and Communications
There is an interesting article in the Harvard Business School publication Working Knowledge titled "Corporate Governance Activists are Headed in the Wrong Direction." Author Joseph Hinsley offers his perspective on majority voting for directors and states that its a flawed concept that neither enhances shareholder democracy nor improves corporate governance.
To read the article click here. We welcome your comments on majority voting for directors.
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Wednesday, June 21, 2006 |
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Growing Support for Majority Vote Proposals
Submitted by: Sarah Cohn, Director of Communications
Shareholder support for proposals seeking majority voting in director elections has averaged 47.3 percent support at 80 meetings this season. Last year, those proposals averaged 44 percent at 60 firms. This season, majority vote proposals received an average of 54.5 percent approval at 33 meetings where companies had not previously announced board election reforms such as a director resignation policy. Support was lower at firms with director resignation policies such as the one at Pfizer and over 90 other firms, averaging 42.1 percent at 47 meetings this season.
To see the results so far this season, Download file
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Friday, May 12, 2006 |
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Majority Vote Trends Continue
Submitted by: Ted Allen, Director of Publications
Shareholder proposals seeking majority voting in director elections continue to do well at U.S. companies that have not announced board election reforms.
So far this season, those resolutions are averaging 56.8 percent of votes cast at 13 firms that had not adopted a director resignation policy or other majority election alternative before issuing their proxy statements, according to ISS data. As of May 10, those proposals had won majority support at 11 of those firms, including a 53 percent showing at Union Pacific and 61 percent support at Verizon on May 4.
The two exceptions were the 27 percent vote at PepsiAmericas and a 32 percent vote for at Paccar. One explanation may be the significant insider shareholdings at those companies. PepsiAmericas has a 53 percent insider voting block, which includes a 43.4 percent stake owned by PepsiCo. At Paccar, directors and officers control 7 percent of the company's shares. This year's vote is slightly better than the 30 percent received by a similar proposal at Paccar in 2005.
By contrast, the strongest showing was a pair of 67 percent votes at Marathon Oil and Sprint Nextel in April. (For more details on other vote results, Download file here to see the table. This table includes 33 meetings where specific vote results were released and then collected by ISS. This data doesn't include the 95 percent vote on April 28 at Marriott International, where management supported the proposal by the Sheet Metal Workers.)
Meanwhile, majority vote proposals continue to lag at companies that have resignation policies like those adopted by Pfizer and more than 80 other firms. Those resolutions have averaged 37.3 percent of votes cast at 22 meetings this season.
However, majority vote proposals won 54 percent support at EMC and 51.8 percent at Chubb, which both have resignation policies. A binding proposal won a surprising 49 percent support at Honeywell International, which also has a resignation policy. (In addition, the United Brotherhood of Carpenters and Joiners report that their proposals won 60 percent support at PerkinElmer and 56 percent support at Raytheon. These two results were not received in time to be included in the table.)
The poorest showing was 19 percent at General Electric, which has adopted one of the strictest director resignation policies. (ISS' recommendation research staff did not support the proposal at GE.) If the GE vote is excluded, then majority voting is averaging 39.3 percent at companies with resignation policies.
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Friday, April 28, 2006 |
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More Support for Majority Voting
Submitted by: Tad Kopinski, Staff Writer
This season's first binding proposal seeking majority voting received more than 49 percent of votes cast at Honeywell this week, according to the proponent, the American Federation of State, County & Municipal Employees (AFSCME).
That showing was significantly higher than the 20 percent vote received by a binding AFSCME proposal at Paychex in October. The Honeywell vote is also noteworthy, because the company had adopted a director resignation policy like those adopted by Pfizer and 85 other U.S. firms. Before the April 24 vote, the best showing for a majority vote resolution at a company with a resignation policy was the 45 percent support at Hewlett-Packard in March for a non-binding proposal by the United Brotherhood of Carpenters and Joiners.
Continue reading "More Support for Majority Voting
Submitted by: Tad Kopinski, Staff Writer" »
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Friday, April 21, 2006 |
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Majority Voting Passes at Sprint
Submitted by: Tad Kopinski, Staff Writer
In another sign of growing investor support for majority voting in director elections, Sprint Nextel shareholders this week endorsed an AFL-CIO proposal with 66.4 percent of votes cast.
The April 18 vote follows a 61.7 percent showing at Novell on April 6 for a United Brotherhood of Carpenters and Joiners proposal. These early votes suggest that majority voting will receive significant investor support this season at companies that have not adopted board election reforms, such as the director resignation policy adopted by Pfizer and more than 80 other U.S. companies since last June.
Continue reading "Majority Voting Passes at Sprint
Submitted by: Tad Kopinski, Staff Writer" »
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Tuesday, March 28, 2006 |
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More Firms Adopt Majority Vote
Submitted by: Thaddeus C. Kopinski, Staff Writer
More U.S. companies are trying to head off shareholder proposals seeking majority board elections by changing their bylaws to require a majority of votes cast to elect a director.
The latest firms to embrace a full majority vote standard include Alaska Air Group, Altera, and Safeway. These changes bring to at least 18 the number of companies that have adopted a majority vote bylaw plus a resignation policy for incumbents who fail to gain the requisite vote, an approach commonly referred to as the "Intel model." Another seven companies have confirmed that they are in the process of doing so.
Continue reading "More Firms Adopt Majority Vote
Submitted by: Thaddeus C. Kopinski, Staff Writer" »
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Friday, March 17, 2006 |
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Majority Voting Gets Mixed Results
Submitted by: Thaddeus Kopinski, Staff Writer
Majority election proposals remain popular among investors, but the first vote results of the season suggest that those resolutions may not fare as well this year at U.S. companies that have adopted director resignation policies.
A proposal by the United Brotherhood of Carpenters and Joiners received 35 percent of votes cast at Analog Devices on March 14 and 31 percent at Ciena the next day. At Hewlett-Packard's March 15 meeting, the resolution received 45 percent support, close to the 44 percent averaged by 62 such proposals last year.
Continue reading "Majority Voting Gets Mixed Results
Submitted by: Thaddeus Kopinski, Staff Writer" »
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Friday, March 3, 2006 |
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Will Investors Choose Majority Vote or Pfizer?
Submitted by: Thaddeus C. Kopinski, Staff Writer
In mid-March, majority election proposals will come to a vote for the first time at three companies that have adopted director resignation policies.
Shareholders at Analog Devices on March 14, and at Hewlett-Packard and Ciena the next day, will have the first chance in the 2006 U.S. proxy season to vote on majority election proposals by the United Brotherhood of Carpenters and Joiners. More significantly, these investors will also be first to decide whether a director resignation policy obviates the need for a full majority standard.
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Tuesday, February 28, 2006 |
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More Firms Adopt Majority Vote
Submitted by: Tad Kopinski, Staff Writer
More U.S. companies are trying to head off shareholder proposals seeking majority board elections by changing their bylaws to require a majority of votes cast to elect a director.
The latest firms to embrace a full majority vote standard include Alaska Air Group, Altera, and Safeway. These changes bring to at least 18 the number of companies that have adopted a majority vote bylaw plus a resignation policy for incumbents who fail to gain the requisite vote, an approach commonly referred to as the "Intel model." Another seven companies have confirmed that they are in the process of doing so.
Continue reading "More Firms Adopt Majority Vote
Submitted by: Tad Kopinski, Staff Writer" »
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Tuesday, February 21, 2006 |
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Calif. Bill Calls for Majority Vote
Submitted by: Thaddeus C. Kopinski, Staff Writer
California state Senator Richard Alarcon has introduced a bill to require companies incorporated in the state to elect directors "by a majority of votes cast."
SB 1207, introduced Jan. 26, is supported by the California Public Employees' Retirement System (CalPERS), which said last March it would pursue changes to state laws to implement majority voting. Read the entire article after the jump...
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