A Little Power To The Shareholders

With the Securities and Exchange Commission’s controversial shareholder proxy access proposal stalled, another corporate governance battle has come to the forefront: a majority-vote standard for director elections. There seems to be considerable momentum for making the change, with a number of stakeholder campaigns underway to encourage companies to require a majority vote of ballots cast in the election of directors. Under the plurality-vote standard that is now common, since director elections are usually uncontested, candidates win as long as they get a single affirmative vote, no matter how many votes are withheld.

An American Bar Association (ABA) task force is considering whether to amend the Model Business Corporation Act and a group of unions and corporations is looking at what a majority-vote standard would involve. During the current proxy season, shareholders at more than 60 companies will vote on resolutions calling for a majority-vote standard. The resolutions, put forward by a group of unions, have some powerful supporters, including Institutional Shareholder Services. In mid-April, majority-vote resolutions won 48% of the votes at Gannett Co. and 38% at Caterpillar Inc. That’s a big improvement from 2004, when the best showing by similar resolutions was 18% in favor.