The Walt Disney Co. has become the latest major company to require that directors receive a majority of the votes cast in order to secure their seats.
Though that might seem self-evident, most U.S. corporations use a plurality model, according to the Investor Responsibility Research Center. Under this structure, shareholders can vote “for” a director or they can withhold their votes; there is no “against” option. Thus, in theory, a director nominee could be elected to the board with a single affirmative vote, even though all the other votes were withheld, the IRRC added.
Under Disney’s newly adopted policy, any director who fails to attain a majority of votes in his or her favor would be required to submit a letter of resignation to the board’s governance and nominating committee, which would recommend to the full board whether the resignation should be accepted.
The media giant has been steadily revisiting its corporate governance since its 2004 annual meeting, when shareholders withheld 45 percent of their votes for Michael Eisner. Though Eisner retained the title of chief executive officer, shortly thereafter he stepped down as chairman.
Office Depot Inc. announced a similar policy earlier this month after 52 percent of shareholders supported this practice at the retailer’s recent annual meeting. Under the retailer’s policy, any nominee who fails to receive a majority must offer to resign; the corporate governance and nominating committee will then make its recommendation to the full board. “We feel that this provision is responsive to our shareholders’ expression at our last annual meeting,” said chairman and chief executive officer Steve Odland, in a statement. “This provision further enhances Office Depot’s already stellar record in the area of corporate governance.”
Office Depot’s decision is especially significant, according to Institutional Shareholder Services, given that Odland also chairs the corporate governance task force of the Business Roundtable — which is known for aggressively opposing a number of corporate governance measures and has urged “careful consideration of the complications any new standard would present.”
A majority of shareholders in at least 14 U.S. companies, including Dell and Supervalu, have supported similar proposals this year, noted ISS. And about two dozen companies, including Pfizer, Best Buy, Hasbro, Hercules, and Lockheed Martin, have agreed to adopt some form of a majority-vote policy, the proxy research firm added.
ISS also pointed out that at Sysco and Paychex, the American Federation of State, County and Municipal Employees has submitted the first binding resolutions seeking majority elections.