Thirty-Three Declassification Proposals Win Approval with Average Support of 82%

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.

With the current proxy season moving toward its final stage, this post provides an updated report about the outcome of precatory declassification proposals that investors represented by the Shareholder Rights Project (SRP) submitted to S&P 500 companies. At this stage of the proxy season, thirty-three precatory declassification proposals submitted to S&P 500 companies by SRP-represented investors won approval, with an average support of 82% of votes cast. These results, as well as the proposals still expected to go to a vote at other S&P 500 companies this season, 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 – including the 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, forty-four S&P 500 companies have entered into agreements committing them to bring management proposals to declassify their boards (information about these negotiated outcomes is available here). In many of the companies receiving proposals, however, negotiated outcomes were not forthcoming, and as a result, shareholder proposals submitted by the SRP-represented investors have been going to a vote at a number of annual meetings. In particular, such proposals have already gone to a vote at thirty-five companies.

Of the thirty-five proposals voted on so far, thirty-three passed. The table below provides information concerning the precatory declassification proposals that passed. As the table indicates, these proposals obtained average support of 82.16% of votes cast.

Of the thirty-five shareholder proposals to declassify that went to a vote, only two proposals (detailed here) did not pass. Although these proposals failed to gain majority support, they received an average support of 48.55% of votes cast.

We hope that all or most of the thirty-three companies where declassification proposals passed will follow the strongly expressed preferences of their shareholders and bring management proposals to declassify to a vote at their 2013 annual meeting.

Company Proponent % of Votes
Cast in Favor
Apache Corporation (APA) ISBI 89.00%
Baxter International Inc. (BAX) NCF 98.07%
Bemis Company (BMS) NCDST 74.75%
CF Industries Holdings, Inc. (CF) LACERA 92.71%
Cerner Corporation (CERN) ISBI 64.93%
Chipotle Mexican Grill, Inc. (CMG) ISBI 89.38%
Cognizant Technology Solutions Corporation (CTSH) LACERA 91.13%
DENTSPLY International Inc. (XRAY) LACERA 78.36%
EQT Corporation (EQT) OPERS 80.98%
Edwards Lifesciences Corporation (EW) ISBI 97.59%
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%
Limited Brands, Inc. (LTD) ISBI 64.54%
Lorillard, Inc. (LO) ISBI 96.35%
MEMC Electronic Materials, Inc. (WFR) NCDST 95.54%
Masco Corporation (MAS) ISBI 84.52%
Moody’s Corporation (MCO) NCF 76.94%
Netflix, Inc. (NFLX) LACERA 74.66%
People’s United Financial, Inc. (PBCT) NCDST 90.61%
QEP Resources, Inc. (QEP) ISBI 87.92%
Quest Diagnostics Incorporated (DGX) ISBI 93.50%
Ryder System, Inc. (R) NCDST 87.67%
SCANA Corporation (SCG) NCDST 60.28%, inc. (CRM) NCF 80.52%
Snap-On Incorporated (SNA) NCDST 84.87%
US Steel Corporation (X) NCDST 82.48%
Urban Outfitters, Inc. (URBN) ISBI 59.99%
V.F. Corporation (VFC) NCF 62.74%
Vornado Realty Trust (VNO) ISBI 85.61%
Vulcan Materials Company (VMC) ISBI 73.45%
Average: 82.16%
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  1. […] and Netflix, Inc. (NASDAQ:NFLX) boards are among the thirty-three out of thirty-five that were which approved declassification, according to a report by Lucian Bebchuk and Scott Hirst, of Harvard Law School. This means that […]