Last month, with the help of fellow ‘economy class investor’ John Chevedden, I submitted a proposal to Hain Celestial (HAIN) to adopt a full majority director election standard. Majority voting has become a widely prevalent practice in the S&P 500 index, with only 14% of companies failing to adopt this standard. Hain is in the S&P 600 mid-cap index where only 47% have adopted a majority vote standard. Most maintain a plurality standard. So, we were attempting to move this good governance standard downstream to mid-caps.
In support of the proposal, I cited the fact that the $3T Council of Institutional Investors maintains the following policy:
Director Elections: Directors in uncontested elections should be elected by a majority of the votes cast. In contested elections, plurality voting should apply… Directors who fail to receive the support of a majority of votes cast in an uncontested election should step down from the board and not be reappointed.
Additionally, the Toronto Stock Exchange (TSX) recently adopted of a majority voting mandate, “further enhancing Canada’s reputation and international position in this area.”
Hain Shareowners Will Vote
I am happy to report that Hain has expressed its intent to endorse amending its bylaws to recommend a majority vote standard at its September 23rd Board meeting. Such an amendment will then be included in the next proxy and annual meeting to be voted on by shareowners. See SEC no-action request dated July 22, 2014.
Hain has been a great investment for me, outperforming the S&P 500 by about 3x during the last 5 years and by about 50% during the last 2, although it has lagged this year. I am concerned that Hain has lost some of its momentum, with more than 60% of its board having served for 12 years or more and with a combined chair and CEO position. However, I am delighted with this most recent action and hope it is a sign of changes ahead.