Council of Institutional Investors

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.

Companies with majority voting require uncontested board nominees to receive more "for" votes than "against" votes in order to be elected or re-elected. The alternative method for electing directors is plurality voting, under which the nominees receiving the most "for" votes are elected to the board. (Thus, in an uncontested election, every nominee elected by a plurality wins his or her seat upon receiving just one "for" vote.) Although 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 standard.

NEW -CII's FAQ on majority voting (released Jan. 5, 2017)
This FAQ explains in fuller detail the range of approaches to electing directors, why it matters and how market participants can support progress toward real accountability.

CII campaign urging companies to adopt majority voting for directors
For many years CII has urged companies to adopt majority voting if a shareholder proposal to adopt the reform received majority support. In the summer of 2016 CII launched a broader campaign to encourage all companies in the Russell 3000 index to adopt majority voting, regardless of their history with related shareholder proposals. The campaign extends to both companies with traditional plurality voting standards as well as companies with "plurality plus" standards.

An example of our outreach is available here. Companies are identified for contact using FactSet data on corporate governance practices. To see the list of companies that have thus far received a letter from CII, please click here (updated Feb. 24, 2017). If you have any additional questions about the campaign, please contact CII Research Analyst Gabriel Morey at gabriel@cii.org.

The campaign's depth is a response to the "majority voting gap" that exists between large-cap companies and smaller companies. According to FactSet, 9 out of 10 S&P 500 companies have majority voting in place, but just 3 in 10 Russell 2000 companies have it.

Majority voting listing standards
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 FAQ on majority voting
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)

Correspondence

July 8, 2014 CII letter to SEC on Committee on Capital Markets Regulation recommendation regarding zombie directors
March 19, 2014 CII letter to NASDAQ on majority voting listing standard
March 19, 2014 CII letter to NYSE on majority voting listing standard
Feb. 24, 2014 CII letter to Industry Canada regarding its Consultation on the Canada Business Corporations Act
Aug. 2, 2013 CII Advisory Council members' letter to NASDAQ on majority voting for directors
Aug. 2, 2013 CII Advisory Council members' letter to NYSE on majority voting for directors
June 20, 2013 CII letter to NYSE on majority voting for directors proposed listing standards
June 20, 2013 CII letter to Nasdaq on majority voting for directors proposed listing standards
March 26, 2013 Delaware bar association response to CII's October 25, 2012, letter on majority voting
Oct. 25, 2012 CII letter to Delaware bar requesting mandatory majority voting for all DE companies
Dec. 1, 2011 CII letter to ABA in response to ABA's October 25, 2011 letter
Oct. 25, 2011 ABA response to CII's August 11, 2011 letter
Aug. 15, 2011 ABA letter indicating receipt and future consideration of CII August 11, 2011 letter
Aug. 11, 2011 CII letter to Delaware bar requesting majority voting to be DE default