Victory at Procter & Gamble

At yesterdays annual meeting, shareowners voted in favor of my wife’s proposal to repeal supermajority standards, such as the 80% standard needed to change or add board members.

Her proposal asked shareowners to adopt a simple majority standard. Supermajority requirements have been used to entrench boards, against the will of a majority of shareowners. They’ve been shown to reduce shareowner value and proposals to repeal such requirements are frequently approved by shareowners, as was the proposal at P&G yesterday. According to the Wall Street Journal, spokesman Paul Fox said the board “welcomes this shareholder input and will consider its position.” Since the vote isn’t binding, we will be carefully monitoring their action.

P&G opposed the measure on the grounds that it would it would then “be possible for a group of minority shareholders to approve a significant change to corporate governance or an extraordinary transaction that may not be in the best interest of the majority of shareholders.” They had it backward. Under current governing documents, a minority of less than 21% can thwart the will of a majority of 79%. According to the Wall Street Journal (P&G Shareholders Vote to Make It Easier to Oust Directors, 10/9/2012):

The vote comes as activist hedge fund manager William Ackman has amassed $1.8 billion in P&G shares and is pressing for improvement in the performance at the consumer-products company, whose brands include Tide, Gillette, Pantene and Crest. Specifically, Mr. Ackman wants the board to replace Chief Executive Bob McDonald after a string of disappointing results, people familiar with the matter have said.

The majority voting standard, if adopted by P&G, could make it easier for Mr. Ackman to mount a proxy fight later should he choose to take that step.

The majority vote proposal—which garnered 59.3% of the votes cast—had the backing of Institutional Shareholder Services, which advises investors like mutual funds how to vote in corporate elections. The firm said such a vote would give P&G investors “a meaningful voice in various board and corporate transactions that impact their rights.”

Many thanks to John Chevedden for his help in filing this proposal. P&G did not seek a “no-action” letter from the SEC (they wouldn’t have been successful). Hopefully, that is a sign they will move forward with implementation now that it has been approved by shareowners. To do otherwise would allow a group of minority shareowners to thwart the expressed will of the majority.

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