March 20, 2006

More Companies Adopt Majority Vote Standard

Thanks to this comprehensive survey by Claudia Allen of Neal, Gerber & Eisenberg, there are a surprising number of companies that have recently adopted a pure majority standard without fanfare. These companies include Motorola, Allied Capital, Texas Instruments, Career Education, Freeport-McMoRan Copper & Gold and United Technologies. We have added all these companies to our own “Majority Vote Chart” and posted Claudia’s survey in our “Majority Vote Movement” Practice Area.

Of 116 companies listed in Claudia’s survey as having taken definitive action since the emergence of the majority vote movement, 78% adopted policies, 18% adopted bylaws, and 4% adopted both a policy and bylaw. Of course, the more important stats relate to which companies adopted pure majority vote standards versus director resignation provisions. Check out Claudia’s survey for more info on that – as well as our chart which is even more comprehensive: we show about 75 companies with a pure majority vote standard (that # likely is comprehensive for that category) and another 50 with a director resignation policy (that # likely is not comprehensive, as these policies are harder to track). And don’t forget about our March 28th webcast: “Practical Considerations: Implementing a Majority Vote Standard.”

Voting Results on First Majority Vote Proposals of the Proxy Season

Last week saw the first voting results from this proxy season on the Carpenters’ Union proposal to implement a majority vote standard. These results indicate that such proposals may not fare too well this year at companies that have adopted director resignation policies.

The proposal received a 35% vote at Analog Devices; 31% at Ciena and 45% at Hewlett-Packard; all of these companies had adopted a director resignation policy in advance of their annual meetings. In comparison, majority vote proposals received an average level of support of 44% last year, as noted in the ISS “Corporate Governance Blog.”

Update on CII and the Majority Vote Movement

Last June, the Council of Institutional Investors asked the 1,500 largest US companies to adopt a majority vote standard for director elections, as covered in this popular podcast with Ann Yerger, Executive Director of CII. About 200 response letters were received.

A few weeks ago, CII completed two follow-up mailings: one letter geared to companies considering the reform, and the other letter pressing non-responders for action. CII already has received 30 responses to the follow-up mailings and more are pouring in every day.

Over 65 companies replied that a form of majority voting was in place, and well over 100 responses said the Council’s request would be taken under consideration at an upcoming governance committee or a full board meeting.

For Those With a New Majority Vote Standard: A Word to the Wise

You will hear more from Cary Klafter of Intel about this – and more – on next week’s webcast – “Practical Considerations: Implementing a Majority Vote Standard – but thought I would blog his suggestion for those facing this issue right now:

“For those companies using some form of ‘majority voting’ arrangement for directors this proxy season: You should give an early heads-up to your transfer agent and to ADP if you plan to have director vote choices on your proxy other than the traditional Yes and Withhold. Intel is using For, Against and Abstain this year, and that affects the proxy card and the ADP Voting Instruction Form (VIF). For example, on the VIF each of the director nominees will be treated like a separate proposal in terms of formatting, numbering of proposals, etc.

Our transfer agent, Computershare, and ADP were each a bit surprised when we raised the point and it took some discussion to resolve the matter. ADP says that it is now fully prepared, but it only knows if you are using a non-traditional vote choice when it gets your proxy statement or if you contact in advance. Advance notice to your service providers would be useful.”