CalPERS Principles CII Policies TIAA-CREF Policy Statement AFL-CIO Voting Guidelines ISS
Every director should be elected annually. (III.B.7.7) Shareowners should be able to call special meetings or act by written consent. (III.B.7.3)
Shareholders should have the right to cumulate votes in a contested election of directors. (III.B.7.10)
All directors should be elected annually. Boards should not be classified (staggered). (§ 2.1) Shareowners should have the right to call special meetings. (§ 4.2)
TIAA-CREF believes that a company’s charter or by- laws should dictate that directors be elected annually by a majority of votes cast. (p. 15)
Directors should be elected annually by a majority ra- ther than a plurality of votes cast. (p. 16)
TIAA-CREF will generally support shareholder reso- lutions asking that each member of the board stand for re-election annually. (p. 30)
TIAA-CREF will generally not support proposals ask- ing that shareholders be allowed to cumulate votes in director elections, as this practice may encourage the election of “special interest” directors. (p. 31) TIAA-CREF will generally support shareholder reso- lutions asking for the right to call a special meeting. However, we believe a 25% ownership level is rea- sonable and generally would not be supportive of pro- posals to lower the threshold if it is already at that level. (p. 31)
TIAA-CREF will consider on a case-by-case basis shareholder resolutions asking that they be granted the ability to act by written consent. (p. 32)
[C]lassified, or staggered term, boards may reduce the ability of shareholders to annually hold direc- tors accountable versus the potential benefit of dis- couraging transactions that may be detrimental to the enhancement of long-term corporate value. (Guideline IV.A.4)
The voting fiduciary's analysis must consider the fact that cumulative voting is a method of obtaining minority shareholder representation on a board and of achieving a measure of board independence from management control. Generally, the fiduciary should support shareholder proposals to restore cu- mulative voting and oppose management proposals to eliminate this feature. (Guideline IV.D.10) In analyzing proposals to limit or eliminate the right of shareholders to call special meetings and act by written consent, the voting fiduciary must weigh the fact that these rights may enhance the opportunity for shareholders to raise issues of concern with the board of directors against their potential for facili- tating changes in control. Generally the fiduciary should oppose any attempts to limit and eliminate such rights if they already exist in a company’s by- laws, and should support shareholder resolutions that seek to restore these rights. (Guideline IV.D.11)
Proxy Voting Guidelines
Vote AGAINST or WITHHOLD from the entire board of directors (except new nominees, who should be considered on a CASE-BY-CASE basis), if [t]he board is classified, and a continuing director responsible for a problematic gov- ernance issue at the board/committee level that would war- rant a withhold/against vote recommendation is not up for election. All appropriate nominees (except new) may be held accountable. (p. 10)
Vote AGAINST [management] proposals to classify (stag- ger) the board. (p. 17)
Vote FOR proposals to repeal classified boards and to elect all directors annually. (p. 17)
Generally vote AGAINST . . . proposals to restrict or pro- hibit shareholders’ ability to act by written consent [or call special meetings]. (p. 27) Generally vote FOR . . . pro- posals that provide shareholders with the ability to call spe- cial meetings [or act by written consent] taking into account [certain] factors . . . . (p. 28)
See p. 18 in relation to cumulative voting.
QuickScore
Are all directors elected annually? . . . (Question 77) What is the percentage of share capital needed to convene a special meeting? . . . [T]he inability to call a special meeting and the resulting insulation of management may result in the decline of corporate performance and shareholder re- turns. (Question 97)
Can shareholders act by written consent? Consent solicita- tions can be advantageous to both shareholders and man- agement in that the process does not involve the expense of holding a physical meeting, and it is easier for shareholders who can simply respond to the proposal by mail . . . Limita- tions on written consent are clearly contrary to shareholder interests. . . (Question 98)
Are there material restrictions as to timing or topics to be discussed, or ownership levels required to call [a special] meeting? . . . Material restrictions include: restrictions that prohibit special meetings more than 90 days away from the prior (or planned future) annual meeting date, restrictions that may be interpreted to preclude director elections or oth- er significant business, and restrictions that effectively raise the ownership threshold required to call the meeting. (Ques- tion 225)
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VIII.D. Poison Pills & Other Takeover Defenses48
ALI Principles/Recommendations BRT Principles NACD Report Conference Board Recommendations OECD Principles/Millstein Report The board of directors, in the exercise of its business
judgment, may approve, reject, or decline to consider a proposal to the corporation to engage in a transac- tion in control. (§ 6.01(a))
A transaction in control of the corporation to which the corporation is a party should require approval by the shareholders. (§ 6.01(b))
The board of directors may take an action that has the foreseeable effect of blocking an unsolicited tender offer, if the action is a reasonable response to the of- fer. (§ 6.02(a))
In considering whether its action is a reasonable re- sponse to the offer:
(1) The board may take into account all factors rele- vant to the best interests of the corporation and shareholders, including, among other things, questions of legality and whether the offer, if successful, would threaten the corporation’s es- sential economic prospects; and
(2) The board may, in addition . . . have regard for interests or groups (other than shareholders) with respect to which the corporation has a legit- imate concern if to do so would not significantly disfavor the long-term interests of shareholders. (§ 6.02(b))
See § 5.15, Transfer of Control in Which a Director
or Principal Senior Executive Is Interested.
See generally Part VI, Role of Directors and Share-
holders in Transactions in Control and Tender Offers.
Not covered. Not covered. Not covered. Markets for corporate control should be allowed to func-
tion in an efficient and transparent manner.
1. The rules and procedures governing the acquisition of corporate control in the capital markets, and ex- traordinary transactions such as mergers, and sales of substantial portions of corporate assets, should be clearly articulated and disclosed so that investors understand their rights and recourse. Transactions should occur at transparent prices and under fair conditions that protect the rights of all shareholders according to their class.
2. Anti-takeover devices should not be used to shield management and the board from accountability. (Principle II.E)
In some countries, companies employ anti-takeover de- vices. However, both investors and stock exchanges have expressed concern over the possibility that wide- spread use of anti-takeover devices may be a serious impediment to the functioning of the market for corpo- rate control. (Annotation to Principle II.E.2)
See Annotation to Principle II.G ([C]o-operation among
investors could also be used . . . to obtain control over a company without being subject to any takeover regula- tions. . . . For this reason, in some countries, the ability of institutional investors to cooperate on their voting strategy is either limited or prohibited.).
See also Principle II.B (Shareholders should have the
right to participate in, and to be sufficiently informed on . . . extraordinary transactions, including the transfer of all or substantially all assets, that in effect result in the sale of the company.).
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In January 2012 (effective immediately), the NYSE eliminated broker discretionary voting with respect to corporate governance matters, for example, to de-stagger the board, adopt majority voting for director elections, eliminate supermajority voting requirements, provide for the use of consents, provide rights to call a special meeting, and adopt certain types of anti-takeover provision overrides. The Dodd-Frank Act requires national securities exchanges to prohibit member brokers from voting customer shares without instructions from the beneficial owner with respect to director elections (other than uncontested elections at registered investment companies), executive compensation and any other “significant matter,” as determined by the SEC.
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