In a news alert released yesterday, the Shareholder Rights Project (SRP), working on behalf of eight SRP-represented investors, announced the substantial results of the work by the SRP and SRP-represented investors during the first six months of 2013, as well as the aggregate impact of their work during 2012 and 2013.
Produced Large-Scale Reforms: As a result of the work of the SRP and SRP-represented investors, 77 S&P 500 and Fortune 500 companies declassified their boards of directors during 2012 or the first half of 2013. The companies that declassified:
- have an aggregate market capitalization approaching one trillion dollars;
- represent over 60% of companies with which engagement took place; and
- represent more than half of the S&P 500 companies that had classified boards as of the beginning of 2012.
The main results of the SRP’s work during the first six months of 2013 include the following:
- 51 Successful engagements (listed here): 51 S&P 500 and Fortune 500 companies have agreed to move toward annual elections following the submission of board declassification proposals for 2013 meetings.
- 34 Board declassifications (listed here): A total of 34 such companies have already declassified during 2013 as a result of the work of the SRP and SRP-represented investors.
- 18 Successful precatory proposals (listed here): 18 precatory declassification proposals (95% of proposals by SRP-represented investors that have gone to a vote at 2013 annual meetings) passed at 2013 annual meetings, with average support exceeding 80% of votes cast.
These results, combined with the outcomes of the work by the SRP and SRP represented investors in 2012, have had a substantial impact on the corporate governance landscape. The aggregate impact of the SRP’s work during 2012 and the first half of 2013 include the following:
- 97 Successful engagements (listed here): 97 of the S&P 500 and Fortune 500 companies receiving proposals in 2012, 2013 or both – about three-quarters of such companies – have agreed to move toward annual elections following the submission of the board declassification proposals.
- 77 Board declassifications (listed here): A total of 77 such companies have already declassified during 2012 and the first half of 2013 as a result of the work of the SRP and SRP-represented investors.
- 57 Successful precatory proposals (listed here): 57 precatory declassification proposals passed during 2012 and the first half of 2013, with average support exceeding 80% of votes cast.
» Benefits of Declassification: Annual elections are widely viewed as corporate governance best practice. Board declassification and the resulting annual elections could make directors more accountable and thereby contribute to improving performance and increasing firm value. The substantial shareholder support for board declassification, and the value of the work done on the subject by the SRP and SRP-represented investors, are described in a two pieces by the SRP’s director – a New York Times DealBook column entitled “Giving Shareholders a Voice,” and a response to critics entitled “Wachtell Lipton was Wrong about the Shareholder Rights Project.”
» Contribution to Successful Shareholder Engagement: The work of the SRP and SRP-represented investors has made a substantial contribution to increasing the incidence of successful shareholder engagement. The successful precatory proposals by SRP-represented investors represented 60% of all successful proposals by public pension funds in 2012 and the first half of 2013, and 31% of successful precatory proposals by all shareholders during that period.
» SRP-Represented Investors: The institutional investors working with the SRP during the first half of 2013 were the Florida State Board of Administration, the Illinois State Board of Investment, the Los Angeles County Employees Retirement Association, the Massachusetts Pension Reserves Investment Management Board, the Nathan Cummings Foundation, the North Carolina State Treasurer, the Ohio Public Employees Retirement System, and the School Employees Retirement System of Ohio. These investors serve more than three million members and manage assets with a total value of more than $400 billion. Additional information about each of the SRP-represented investors is available here.
» SRP Work: The SRP provides SRP-represented investors with a range of services, including assistance in connection with selecting companies for proposal submission, designing proposals, submitting proposals on behalf of represented investors, engaging with companies, negotiating and executing agreements by companies to bring management declassification proposals, and presenting proposals at annual meetings.