Repealing Classified Boards in S&P 500 Companies

Professor Lucian Bebchuk is the Director of the Harvard Law School Shareholder Rights Project (SRP), and Scott Hirst is the SRP’s Associate Director. Any views expressed and positions taken by the SRP and its representatives should be attributed solely to the SRP and not to Harvard Law School or Harvard University.

The Harvard Law School Shareholder Rights Project (SRP) is a clinical program at Harvard Law School through which faculty, staff and students assist public pension funds and charitable organizations to improve corporate governance at publicly traded companies in which they are shareowners. Below are links to joint press releases issued earlier this week by the SRP with each of five institutional investors – the Illinois State Board of Investment, the Los Angeles County Employees Retirement Association, the Nathan Cummings Foundation, the North Carolina State Treasurer, and the Ohio Public Employees Retirement System.

During the 2011-2012 proxy season, the SRP has been representing and advising these institutional investors in connection with the submission of shareholder proposals to more than eighty S&P 500 companies that have staggered boards. The proposals urge a move to annual elections, which are widely viewed as corporate governance best practice.

Through active engagement with companies receiving declassification proposals, the SRP and the institutional investors working with the SRP have been able to reach negotiated outcomes with forty-two of the companies receiving such proposals. These forty-two companies have entered into agreements committing them to bring management proposals to declassify their boards of directors.

The forty-two companies that have entered into agreements to bring management declassification proposals represent about one-third of the S&P 500 companies that had staggered boards at the beginning of this proxy season. A list of twenty-five companies that have entered into such agreements is available here. The list includes only companies that, after they entered into such agreements, issued a public filing disclosing the planned management proposal. The list will be updated periodically as more companies disclose management proposals brought pursuant to such agreements.

The press releases providing more information about the work described above are available at the following links:

Joint press release by the Illinois State Board of Investments and the SRP

Joint press release by the Los Angeles County Employees Retirement Association and the SRP

Joint press release by the Nathan Cummings Foundation and the SRP

Joint press release by the North Carolina Department of State Treasurer and the SRP

Joint press release by the Ohio Public Employees Retirement System and the SRP

The Illinois State Board of Investments is a non-appropriated state agency that is responsible for managing and investing the pension assets of the Illinois General Assembly Retirement System, the Judges’ Retirement System of Illinois and the State Employees’ Retirement System of Illinois.

The Los Angeles County Employees Retirement Association, the largest county retirement system in the United States, administers and manages the retirement fund for employees of Los Angeles County and its outside districts, and their beneficiaries. LACERA managed assets with a value exceeding $36.5 billion and provided retirement benefits and savings for more than 148,000 members as of December 31, 2011.

The Nathan Cummings Foundation is a charitable foundation and an institutional shareholder, and submits shareholder resolutions on issues that lie at the intersection of its programmatic interests and long-term shareholder value.

The North Carolina Department of State Treasurer managed assets with a value exceeding $71.8 billion, and provided retirement benefits and savings for more than 850,000 North Carolinians, including teachers, state employees, firefighters, police officers, and other public workers, as of December 31, 2011.

The Ohio Public Employees Retirement System, the largest public pension fund in Ohio, managed assets with a value exceeding $73 billion, and provided retirement benefits and savings for more than 954,000 members, as of December 2011.

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