We have an early partial victory at Clorox (CLX). Real victory at Clorox will depend on getting out the vote. Yes, that is the same as what is required for government elections in November if we want change. The Clorox meeting is also expected in November.
High voter turnout is required at Clorox because we seek, now with the Board’s endorsement, to overturn a supermajority provision in the Certificate of Incorporation that requires 80% of the voting power vote FOR repealing supermajority requirements for approval of business combinations. For that provision to be repealed, we need to turn out a huge percentage of shareholders and get the to vote in favor. Following is the “Resolved” portion of our proposal:
Partial Victory at Clorox: Resolved
RESOLVED, Clorox Co. (CLX) shareholders request that our board take each step necessary so that each voting requirement in our charter and bylaws that calls for a greater than simple majority vote be eliminated, and replaced by a requirement for a majority of the votes cast for and against applicable proposals, or a simple majority in compliance with applicable laws. This means the closest standard to a majority of the votes cast for and against such proposals consistent with applicable laws. It is important that our company take each step necessary to adopt this proposal topic. It is also important that our company take each step necessary to avoid a failed vote on this proposal topic.
Partial Victory at Clorox: Supporting Statement
In our Supporting Statement we observed shareowners will pay a premium for shares of companies that have excellent corporate governance. Supermajority voting requirements are one of six primary entrenchment mechanisms negatively related to company performance, according to What Matters in Corporate Governance by Lucien Bebchuk, Alma Cohen and Allen Ferrell.
Supermajority requirements block initiatives supported by most shareowners but opposed by a status quo management. The majority of S&P 500 and S&P 1500 companies have no supermajority voting requirements.
This proposal topic won from 59.2% to 75.1% of the vote at Kaman, DowDuPont and Ryder System in early 2018. Prior to that, it won 74% to 99% support at Weyerhaeuser, Alcoa, Waste Management, Goldman Sachs, FirstEnergy, McGraw-Hill, Macy’s, Ferro Arconic, and Cognizant Technology Solutions.
Partial Victory at Clorox: Board Response
Through a no-action letter, instead of talking with us directly, the Company let it be known the Board adopted a resolution as follows on July 3rd:
- Declaring advisable a proposal to eliminate the supermajority voting provisions from the Certificate of Incorporation by deleting the text of Article Six from the Certificate of Incorporation in its entirety (the “Proposed Certificate Amendment”) and directing the Proposed Certificate Amendment’s submission for stockholder approval and adoption at the Company’s 2018 Meeting;
- Recommending that stockholders vote for the approval of the Proposed Certificate Amendment at the Company’s 2018 Meeting; and
- Ratifying the Company’s retention of a proxy solicitor to assist with the solicitation of proxies in connection with the Company’s 2018 Meeting.
Partial Victory at Clorox: Our Response and Further Action
Given the Board’s action, our initiative has so far met with a partial victory at Clorox. To save unnecessary expenditure by Clorox and the SEC, we withdrew our proposal contingent on the Board following through with its July 3 resolution.
Next, we hope Clorox, through its solicitor, will make a real effort to get out the vote. Winning 80% approval of the “voting power,” not the “vote,” is a high threshold. We expect to see higher overall votes, as a result of Company proxy solicitation efforts. We may file a Notice of an Exempt Proxy Solicitation (PX14A6G) to help voter turnout. If you own Clorox stock, please help us change a partial victory at Clorox into a clear win for all shareholders by voting to delete the text of Article Six from the Certificate of Incorporation.
The text of our withdrawal follows:
Thank you for notification of the Board’s 3-point action to include a proposal to amend the Certificate of Incorporation and recommend stockholders vote to eliminate the supermajority voting provisions at the 2018 annual meeting.
Since the requirement for repeal is 80% of the voting power, we expect the Company will make every reasonable effort through its proxy solicitor to ensure a positive vote.
The company directors received only 67% support at the 2017 annual meeting and they stood for election unopposed. We hope that the company directors are interested in receiving greater than 67% support at the 2018 annual meeting.
Given the Board’s action and to minimize Company and SEC expenses, I hereby withdraw Mr. McRitchie’s proposal contingent on the Board following through with its 3-point July 3, 2018 resolution.
Yes, future support for directors will depend, in part, on an evaluation of efforts made by Clorox though its proxy solicitor to support repealing the supermajority requirement.