October 6, 2005
Bill, you have indicated that not all the resolutions are alike. The shareholder voting bylaws some shareholders seek that have teeth require an absolute majority vote (a majority of the outstanding shares) to seat a director. Such proposals are usually defeated. Some bylaw proposals only require a majority of those represented at the meeting to seat a director as long as there is a voting quorum. A few firm's have voluntarily adopted these. 99.99 percent of the time directors get these kinds of relative majorities at meetings anyway. The resolutions you dislike, which seem to represent a majority of those voluntarily adopted by firms, enable a board to overrule, at the board's discretion, a shareholder vote that does not meet the relative majority threshold; the board can choose to seat the director anyway even though a director recieves a relative majority of "withhold" votes. Such cases are very, very rare (even Eisner at Disney got a relative affirmative majority vote). The weaker resolutions, therefore, do not change practice much or change the results often do but change the public attitude and commitment to the shareholder franchise in corporations that adopt them. The cynical may claim that it is only a sham. I view it as a small first step to absolute majority requirements or contested elections.
Contested elections, or the potential of contested elections, on the firm's proxy are really the way to go. Then a corporation does not have to worry about absolute majorities. Open the frim's proxy to another director nomination by one of the firm's ten largest shareholders (asked in order of holdings). If none step up, then a majority of those represented is enough; if on steps up the person with the most votes wins. There are other versions that also would work. Firms that voluntary adopt these systems would empower their shareholders and, if I am correct, find a bonus in their stock price. Have any firms tried this yet??
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