Board members more tolerant of shareholder dissent

Directors growing used to higher levels of shareholder dissatisfaction, PwC survey shows

Corporate directors care less about the level of shareholder support for board members in elections this year as shareholders increasingly express dissent.

Only 51 percent of board members say they would be ‘concerned’ about renominating a fellow director who received less than 75 percent support in a direct shareholder vote, according to a PwC survey of directors. That number is down from 59 percent last year.

The number of directors who say 80 percent support or less would make them uneasy has dropped to 17 percent from 18 percent, and the number who cite 85 percent support as an uncomfortably low level has declined three percentage points to 8 percent.

The rising tolerance for lower shareholder support likely comes amid increasingly raucous shareholder battles, PwC notes. ‘One potential reason is that directors may be more acclimated to an environment where dissatisfied shareholders may choose to make their voices heard by voting against a director or withholding their vote,’ say the study authors. 

While directors have grown less sensitive to levels of shareholder support, they have grown more intolerant of a perceived lack of performance of their fellow directors, with 35 percent of those surveyed saying they would like to replace someone on their board. That number is up from 31 percent last year.

Nineteen percent of all those surveyed say they would replace a fellow board member because ‘aging has led to diminished performance’ while 16 percent say a director should be replaced for lacking ‘the expertise required’. Fifteen percent of directors want somebody replaced for being unprepared for meetings and 11 percent cite a director overstepping ‘the boundaries of his/her oversight role’. Almost one in 10 say a director at their company ‘serves on too many boards’.

The survey covers 934 directors of public companies, 70 percent of whom serve on the boards of companies with more than $1 bn in annual revenue.

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