Saturday, March 30, 2013


For years, people have bemoaned the fact that relatively few seats in Congress are really contests because the incumbent is usually re-elected.  In the case of corporate board members, the situation is much worse.
Bad Directors and Why They Aren’t Thrown Out
Published: March 29, 2013
NY Times

According to Patrick McGurn, special counsel for one of the major shareholder advisory services, Institutional Shareholder Services, shareholder efforts to remove directors in uncontested elections rarely succeed or come close, even in egregious circumstances. Last year, there were elections for 17,081 director nominees at United States corporations, according to the service. Only 61 of those nominees, or 0.36 percent, failed to get majority support. More than 86 percent of directors received 90 percent or more of the votes. Of the 61 directors who failed to get majority approval, only six actually stepped down or were asked to resign. Fifty-one are still in place, as of the most recent proxy filings.

While paying lip service to principles of shareholder democracy, companies have fought for decades to insulate directors from shareholder disapproval.

Under the plurality voting systems still prevalent at many companies, the nominees who receive the highest number of affirmative votes cast are elected no matter how few votes they get out of the total cast. Since the board decides the number of nominees, and most nominate only as many as there are open seats, they’ll all be elected, even with a single yes vote (which may be their own).

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