Twelve Shareholder Declassification Proposals Submitted by SRP-Represented Investors Win Approval with Average Support of 79%

Editor’s Note: 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.

Although the current proxy season is still in its early stages, shareholders of twelve S&P 500 companies have already approved precatory declassification proposals that investors represented by the Harvard Law School Shareholder Rights Project (SRP) submitted. These early results, as well as the large number of such proposals expected to go to a vote at other S&P 500 companies, are described further below.

As described in detail on the SRP’s website, during the 2011-12 proxy season, the SRP has been representing and advising several institutional investors – Illinois State Board of Investment (ISBI), the Los Angeles County Employees Retirement Association (LACERA), the Nathan Cummings Foundation (NCF), the North Carolina State Treasurer (NCDST), and the Ohio Public Employees Retirement System (OPERS) – in connection with the submission of precatory shareholder proposals to more than eighty S&P 500 companies that have classified boards. The proposals urge repealing the classified board and moving to annual elections, which are widely viewed as corporate governance best practice.

Through active engagement with companies receiving declassification proposals, negotiated outcomes have been obtained with forty-four S&P 500 companies. These forty-four companies have entered into agreements committing them to bring management proposals to declassify their boards. Overall, the forty-four companies that have entered into such agreements represent about one-third of the S&P 500 companies that had staggered boards as of the beginning of this proxy season. At this stage of the proxy season, twelve agreed-upon management proposals to declassify have already been approved by shareholders.

In many of the companies receiving proposals, however, negotiated outcomes have not been obtained. In such cases, the shareholder proposals submitted by the SRP-represented investors are expected to go, or have already gone, to a vote at the 2012 annual meeting. In particular, such proposals have already gone to a vote at sixteen companies, and fourteen of them have already released voting results.

Of these fourteen proposals, twelve have already passed. The table below provides information concerning the precatory declassification proposals that passed. As the table indicates, these proposals obtained average support of 79.25% of votes cast.

Two shareholder proposals to declassify (detailed here) did not pass. Although these proposals failed to gain majority support, they received an average support of 48.55% of the votes cast.

Precatory proposals are expected to go to a vote at twenty-two other S&P 500 companies. A list of these companies is available here.

Company Proponent % of Votes
Cast in Favor
EQT Corporation  (EQT) OPERS 80.98%
F5 Networks, Inc. (FFIV) ISBI 77.20%
FLIR Systems, Inc. (FLIR) NCF 81.94%
FMC Corporation  (FMC) NCF 82.65%
Hess Corporation  (HES) NCDST 77.55%
Lexmark International, Inc.  (LXK)  NCDST 92.82%
Moody’s Corporation (MCO) NCF 76.94%
People’s United Financial, Inc. (PBCT) NCDST 90.61%
SCANA Corporation (SCG) NCDST 60.28%
Snap-On Incorporated (SNA) NCDST 84.87%
US Steel Corporation (X) NCDST 82.48%
V.F. Corporation (VFC) NCF 62.74%
  Average: 79.25%
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