Shareholder Proposals Still Making Waves

Preliminary results of a new study show a slight decline in the number of shareholder proposals that gained a majority vote. But a significant number of filings have yet to be tallied.

Nearly 23 percent of shareholder proposals have received majority votes this year, according to the Investor Responsibility Research Center. However, that initial tally is on pace to fall slightly short of last year’s success rate, when 134 proposals out of 447 (about 30 percent) got majority support.

IRRC officials stress that the count is still preliminary and that a large part of the voting results will not be available until later this summer, when companies file their 10-Qs with the Securities and Exchange Commission. Still, it’s interesting to take an early peek at the results.

So far, classified board proposals have gotten the most majority votes. Twelve of the 17 proposals for which IRRC has voting results attracted more than 50 percent of the ballots, continuing a trend that started several years ago. Last year, 38 of 39 proposals asking companies to remove their staggered boards received support from more than 50 percent, according to IRRC.

Also continuing a recent trend, 10 of 15 proposals seeking to rescind poison pills received majority support. In 2004, 40 out of 51 proposals that asked companies to either eliminate or require a shareholder vote on their poison pills received majority support.

This year, the hot new issue is the campaign to require a majority vote when electing directors. So far, 9 of the 34 proposals received a majority vote. As an indication of how much momentum that issue has gained, last year 12 such proposals generated support of just 12 percent, on average.

Meanwhile, all seven proposals asking companies to eliminate their supermajority voting provisions received majority support. That’s the same as last year’s tally, when all seven proposals received a majority vote.

Another popular issue among shareholders is the size of golden parachutes. IRRC officials note that preliminary results show that 7 of the 11 golden-parachute resolutions received majority support. Last year, 16 out of 26 similar proposals received more than 50 percent of the votes cast. Typical proposals asked companies to provide shareholder approval for any future severance agreements with senior executives that provide benefits in an amount exceeding 2.99 times the sum of the executive’s base salary plus bonus.

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