September 28, 2009
Plural and Majority Voting
Today's WSJ has a good article on the beauties of plural voting for directors. The machinations of corporate voting can be hard for normal people to understand. In fact, when I introduce corporate voting to my introductory corporations classes, I usually have to rely on visual aids involving horses and finish lines. Frustration with plural voting gave rise to "withhold" campaigns, majority voting policies (example: Sherwin-Williams), majority voting bylaws (Morris, Nichols memo on majority voting bylaws) and then finally the amended sec. 141(b).
The knock on all of these developments was that even though a majority of shareholders might vote to withhold, that a director could nevertheless still retain her seat. The WSJ reported Riskmetrics' data on voting at 50 companies. Ninety-three directors failed to get a majority votes. Directors at two companies that had either majority voting policies or bylaws submitted their resignations as required, but then were promptly reappointed to the board. Apparently, no directors actually lost their seats following an election in which they received less than 50% of the vote. So much for shareholder democracy.
I think Webb Crockett, a director at Southwest Airlines who garnered just 46.3% of the vote, sums it up nicely, "I have the grey matter to serve...How many people who voted against me have any knowledge of my expertise about Southwest and the airline industry?" Yummy, cake.
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