Editor’s Note: Lucian Bebchuk
and Scott Hirst are Professor of Law, Economics and Finance and Lecturer on Law, respectively, at Harvard Law School. Their earlier post about the work of the ACGI is available here
This post provides a summary of work to declassify corporate boards done during the 2010-11 proxy season by the American Corporate Governance Institute (ACGI). This work contributed to moving 22 S&P 500 companies toward board declassification, which could result in as much as a 15% reduction in the incidence of board classification among S&P 500 companies from the beginning of the 2010-11 proxy season.
During the 2010-2011 proxy season, the ACGI worked with two institutional investors, the Florida State Board of Administration (SBA) and the Nathan Cummings Foundation (NCF), on the submission of shareholder declassification proposals. The ACGI assisted these institutional investors with designing and drafting proposals, selecting companies for submission of proposals, communicating with the Securities and Exchange Commission with respect to no-action requests, engaging with companies to reach negotiated outcomes, and, when such negotiations were not successful, presenting proposals at shareholder meetings.
This work on behalf of the SBA and the NCF during this proxy season resulted in: (i) seven S&P 500 companies passing charter amendments to declassify their boards; (ii) six S&P 500 companies committing to submit management declassification proposals for shareholder approval at their 2012 shareholder meeting; and (iii) passage of shareholder declassification proposals, with average support of 82.2% of votes cast, at nine S&P 500 companies at which SBA and NCF proposals were voted on. We provide further details of each of these results below.
Charter Amendments to Declassify in Seven Companies
Following the submission of proposals, the ACGI assisted the SBA and NCF in negotiating and reaching agreements pursuant to which management agreed to bring charter amendments to declassify their boards of directors to a vote of shareholders. In addition, following the submission of one of the proposals (to Watson Pharmaceuticals, Inc.), the company announced a plan to bring a declassification proposal to a vote at its 2011 annual meeting. Altogether, the ACGI’s work contributed to the passage of seven charter amendments to declassify the boards of directors of S&P 500 companies. Those companies, with the percentage of votes cast and the percentage of outstanding shares supporting the declassification amendment, were as follows:
…continue reading: Moving Twenty-Two S&P 500 Companies towards Board Declassification