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Majority Voting for Directors
CII's corporate governance policies state that in uncontested elections, directors should be elected by majority vote; directors who fail to receive a majority support should step down from the board and not be reappointed.
Majority voting ensures that shareowners’ votes count and makes directors more accountable to the shareowners they represent.
While the vast majority of companies in the S&P 500 use the majority vote standard for uncontested director elections, thousands of U.S. companies still use the plurality vote standard. Even some companies that have embraced majority voting for directors grant boards discretion to overrule shareowners and reappoint incumbent directors who fall short of majority support in uncontested elections.
Problem with plurality voting: With plurality voting, the nominee who receives the most "for" votes for a board seat wins. This means that in an uncontested election, a nominee will be elected even if he receives just one "for" vote. Plurality voting in uncontested elections results in "rubber stamp" elections, entrenched boards and, occasionally, directors who lack the confidence of most of the shareowners.
CII campaign urging companies to adopt majority voting for directors
In July 2016, CII launched a campaign to encourage companies in the Russell 3000 index to adopt majority voting standards for director elections.
CII kicked off the campaign with letters to 186 Russell 1000 companies with plurality voting standards (see sample letter here). CII also wrote to eight more companies in the Russell 1000 that use plurality voting within a dual-class system (sample letter). Companies with plurality standards that require a director who fails to win majority support to tender her resignation were not excluded from the mailing, since resignation policies do not have the same force as a majority standard.
Companies were selected using FactSet, a database for corporate governance factors. To see the list of companies that have received a letter from CII, click here (updated 9/8/2016). If you have any additional questions or comments, please contact CII Research Analyst Gabriel Morey at email@example.com.
Make majority voting a listing standard: In 2013, CII petitioned NYSE Euronext and the Nasdaq Stock Market to require listed companies to (1) elect directors by majority vote when there is not a contest for board seats and (2) not reappoint directors who fall short. Many CII members and other market participants endorsed CII's petitions, including: members of the CII Advisory Council (NYSE, Nasdaq), the California State Teachers' Retirement System (NYSE, Nasdaq), the Florida State Board of Administration (NYSE, Nasdaq), Hermes Equity Ownership Services (NYSE, Nasdaq) and the UAW Retiree Medical Benefits Trust (NYSE, Nasdaq).
Resources & Advocacy
CII corporate governance policy on majority voting for directors
CII annual letter-writing campaign urging boards not to reappoint "zombie" directors (members only)
CII campaign to make majority voting an exchange listing standard (see above and June 20, 2013, letters below)