End Zombie Directors: Action Needed for Majority Vote Mandate

MajorityVoteI urge readers to support the June 20th petition by the Council of Institutional Investors (CII) to the NYSE and Nasdaq for the exchanges to require listed companies to elect directors by majority vote in uncontested elections. CII’s letters to both exchanges are posted here.

Majority voting for directors is a fundamental shareholder right in nearly all major markets around the globe – but not in the U.S. Please consider supporting CII’s campaign to win this basic right for investors in U.S. companies by sending letters to the NYSE and Nasdaq. ICGN added its voice with July 11 letters endorsing a listing standard that mandates majority voting for directors. But the exchanges need to hear from as many market participants as possible.

Letters can be emailed to:

Mr. John Carey
Vice President-Legal
NYSE Regulation, Inc.
NYSE Euronext
20 Broad Street, 24th Floor
New York, New York 10005
[email protected]

and

Mr. Edward Knight
Executive Vice President & General Counsel
NASDAQ OMX
805 King Farm Boulevard
Rockville, MD 20850
[email protected]

I’ve reproduced one of my letters below. Please feel free to cut and paste from it liberally, except for the second paragraph.

Via Email: July 17, 2013

Mr. Edward Knight
Executive Vice President & General Counsel
NASDAQ OMX
805 King Farm Boulevard
Rockville, MD 20850

Dear Mr. Knight:

I join with the Council of Institutional Investors (CII) and International Corporate Governance Network (ICGN) in requesting that you propose a rule for approval by the Securities and Exchange Commission (SEC) that boards with NASDAQ listed equity securities adopt a majority voting standard in uncontested elections of directors with a requirement that incumbent directors who do not receive a majority of votes promptly resign from the board. I support the proposed amendments submitted by CII on June 20, 2013.

I am a long-term investor and publisher of Corporate Governance (CorpGov.net), which since 1995 has been a leading source of news and commentary on the internet. CorpGov.net was named by Lexis Nexis as one of 25 top business law sites and I was named by the National Association of Corporate Directors in their Directorship 100 people to watch for the last three years.

Directors in uncontested elections should be elected by a majority of the votes cast. Those who fail to receive the support of a majority of votes cast should step down from the board and not be reappointed. A modest transition period may be appropriate under certain circumstances, such as for directors needed to keep companies in compliance with legal or listing standards. However, any director who does not receive the majority of votes cast should leave the board as soon as practicable.

Without such provisions, elections fail to have any real meaning.  What are “elections,” if they cannot impact the outcome? For elections to be meaningful, there must be the possibility of directors being removed. While 78% of the S&P 500s do elect directors by majority vote, thousands of public companies still cling to plurality voting and among those with a majority voting standard, only half of directors ultimately step down after failing to obtain a majority of affirmative votes.

Please seek a rule change to put an end to “zombie” directors. Investors will trust markets only when corporate elections have meaning.

Sincerely,

James McRitchie, Publisher

Corporate Governance 
https://www.corpgov.net
9295 Yorkship Court
Elk Grove, CA 95758

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