EllieMae Declassified Board. 8-K filing mentions the Board’s 2018 proposal but fails to mention my shareholder proposal in 2017, which won 87% of the vote and drove the Board’s 2018 proposal. Unfortunately, I am not as good at following up on implementation as I should be. This was brought to my attention thanks to a diligent reader. Below is my writeup that led to the EllieMae declassified board.
James McRitchie (that’s me) is the proponent. I voted ‘FOR.’ Only 31% of the S&P 1500 have a classified board. Per the chat below, classified boards are rare at S&P 500 companies. Here’s what Egan-Jones said:
Recommendation: After evaluating the details given about the shareholder proposal, we believe that corporate governance procedures and practices, and the level of accountability that the Company imposes, are closely related to financial performance. It is intuitive that when directors are accountable for their actions, they perform better. We therefore prefer that the entire board of a company be elected annually to provide appropriate responsiveness to shareholders. As such, we recommend a vote FOR this Proposal.
Background: The shareholders are being asked that the Company take the steps necessary to reorganize the Board of Directors into one class with each director subject to election each year. Although the company can adopt this proposal topic in one-year and many investors are in favor of a one-year implementation, this proposal allows the option to phase it in over 3-years.
Arthur Levitt, former Chairman of the Securities and Exchange Commission said, “In my view it’s best for the investor if the entire board is elected once a year. Without annual election of each director shareholders have far less control over who represents them.”
A total of 79 S&P 500 and Fortune 500 companies, worth more than one trillion dollars, adopted this proposal topic since 2012. Annual elections are widely viewed as a corporate governance best practice. Annual election of each director could make the directors more accountable, and thereby contribute to improved performance and increased company value.
This proposal may get strong support at the 2017 annual meeting. For instance in 2016 the Company gave strong majority support to another corporate governance improvement proposal – proxy access for shareholders.
Now that EllieMae Declassified Board, what’s next? I am thinking majority voting requirements to elect directors. Your recommendations?