CalPERS, the nearly $221 billion pension fund, plans to enhance a campaign designed to make corporate management more accountable to shareholders
Its Majority Vote initiative, a system set to replace the plurality policy will be rolled out into the New Year.
The initiative, which was launched last spring, advocates a policy of electing board candidates for uncontested seats by a majority vote; this replaces the previously used plurality (which may be no more than one vote). To date, 20 of the 58 companies that the pension fund identified for the issue, have already voluntarily implemented or plan to adopt the standard, CalPERS said.
According to the Sacramento, Calif.- based pension plan, ‘the proposed majority vote policy backed by CalPERS would require the resignation of any director who receives a withhold vote greater than 50 percent of the votes cast.’
Moreover, CalPERS intends to file shareowner proposals for majority vote with organizations such as, Annaly Capital Management, Apple, BB&T Corp., and V.F. Corporation, and expects to continue engaging the remaining companies.
The initiative is viewed as ‘an effective tool for holding directors accountable for creating shareowner value and encouraging better shareowner-director communication,’ says Joseph Dear, CalPERS chief investment officer (CIO). ‘Too often board elections are more like a coronation than an election.’
Currently, most corporate elections are known to use a plurality vote system, where directors are allowed to be elected by the vote of a single share ‘unless they are opposed by a dissident candidate,’ the institutional investor said in a statement earlier this year.
In August, the Securities and Exchange Commission adopted proxy access rules that is set to take effect in 2011 and will enable shareholders to nominate 25 percent of the board or one director. However, some critics feel that this move is a sign of the SEC overstepping its jurisdiction by passing rules on proxy access.
