Shareholders pushing for changes to the way US company directors are elected look set to gain significant support at a test case vote on the issue at Apple’s annual meeting on Wednesday.
In an important indicator of investor willingness to press for greater shareholder rights, the California Public Employees’ Retirement System has put a proposal to the meeting seeking to introduce majority voting on the election of directors.
One of the first and most high-profile meetings of this year’s proxy season, the result of a non-binding proposal is expected to point to the outcome of votes elsewhere.
With almost 60 per cent of the votes cast so far, 74 per cent have voted in favour of changing the company’s voting system, according to Calpers.
“Majority voting is the number one issue as far as shareholder resolutions go,” said Patrick McGurn of proxy adviser Institutional Shareholder Services. “This is the year that the focus shifts back to annual meetings from regulatory changes.”
As part of a campaign by the three largest US pension funds, Calpers asked 58 large US companies to adopt majority voting.
“There are all manner of issues shareholders might want to address” said Anne Simpson, senior portfolio manager in charge of corporate governance at Calpers.
“But if you don’t have consequences, a vote on board members, then really this is all talk.”
So far, 28 companies contacted by Calpers have adopted the measure or are committed to doing so.
Apple elects directors under a “plurality” voting system, which allows directors in unopposed elections to be elected by a single “yes” vote. It is fighting the proposal, arguing that a quirk of California law means it would lose discretionary powers to ignore a vote where a director has shareholder support, but does not gather enough votes to hit the required quorum level – just over 25 per cent of a company’s shares.
Apple shareholders “have always had the ability to remove directors with or without cause for any reason, including to express dissatisfaction with a particular director”, said the company in its proxy statement sent to investors.
Calpers itself holds only 0.24 per cent of Apple’s shares. However, the influential ISS has recommended that its clients support the proposal.
TIAA-CREF, which owns 0.98 per cent of Apple, and has a long history of advocacy for shareholder rights, will on Thursday publish a new policy statement on corporate governance. As a first principle, “directors should be elected annually by a majority rather than a plurality of votes cast”, the document says.