Seventeen Boards of S&P 500 Companies Already Declassified Following Agreements with SRP-Represented Investors

Editor’s Note: Professor Lucian Bebchuk is the Director of the 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.

Already at this stage of the current proxy season, seventeen charter amendments declassifying boards of S&P 500 companies have been adopted following agreements entered into with investors represented by the Shareholder Rights Project (SRP). Details about these early results, as well as about the large number of agreed-upon management proposals to declassify expected to go to a vote at other S&P 500 companies later on, are provided below.

As described 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 receiving proposals from the SRP-represented investors (about half of the companies receiving such proposals). 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, and have an aggregate market capitalization that exceeds (as of April 1, 2012) half a trillion dollars.

Of the forty-four agreed-upon management proposals, twenty-three management proposals have already gone to a shareholder vote. Of these twenty-three proposals, seventeen have passed, resulting in declassification of the board. The table below provides information concerning the agreed-upon management proposals that passed. As the table indicates, these proposals obtained average support of 99.08% of votes cast and 81.01% of votes outstanding.

The six management proposals to declassify that did not pass (detailed here) did receive a majority of the votes (95.51% of the votes cast on average, and 67.22% of the votes outstanding on average). However, the proposals did not pass due to the presence of high supermajority requirements.

Agreed-upon management proposals to declassify are expected to go to a vote at other S&P 500 companies later on. A list of such companies that have already made public filings that disclose the planned management proposals is available here.

COMPANIES WHERE BOARDS WERE DECLASSIFIED FOLLOWING
AGREEMENTS WITH SRP-REPRESENTED INVESTORS
% of Votes Cast in Favor
Company Proponent Of votes cast Of shares outstanding
C.H. Robinson Worldwide, Inc.  (CHRW) NCF 99.43% 71.61%
C.R. Bard, Inc.  (BCR) OPERS 99.52% 82.90%
Cabot Oil & Gas Corporation  (COG) NCDST 99.81% 85.59%
Cameron International Corporation  (CAM) NCDST 98.57% 86.57%
FMC Technologies, Inc.  (FTI) NCDST 99.82% 85.12%
Helmerich & Payne  (HP) NCDST 99.76% 82.37%
Hudson City Bancorp, Inc.  (HCBK) NCF 97.15% 70.62%
Intuitive Surgical, Inc.  (ISRG) NCDST 99.70% 91.00%
Janus Capital Group Inc.  (JNS) NCDST 99.35% 89.96%
NRG Energy, Inc.  (NRG) NCDST 98.39% 81.17%
Newell Rubbermaid Inc.  (NWL) ISBI 99.68% 79.10%
Owens-Illinois, Inc.  (OI) ISBI 99.28% 83.76%
TECO Energy, Inc.  (TE) NCF 97.78% 66.08%
The Progressive Corporation  (PGR) ISBI 99.80% 85.28%
Rowan Companies, Inc.  (RDC) NCDST 98.08% 71.08%
Stanley Black & Decker, Inc.  (SWK) NCDST 98.32% 79.56%
Wyndham Worldwide Corporation  (WYN) NCF 99.95% 85.36%
Average: 99.08% 81.01%
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