At most U.S. public companies, shareholders elect directors by a plurality of votes cast rather than a majority of votes cast. Under 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 she receives just one "for" vote. Plurality voting in uncontested elections results in "rubber stamp" elections, entrenched boards and, at times, directors who lack the confidence of most of the shareholders.
CII believes that majority voting ensures that shareowners’ votes count and makes directors more accountable to the shareowners they represent.
While 78 percent of companies in the Standard & Poor’s 500 Index use the majority vote standard for uncontested board elections, thousands of U.S. companies still use plurality voting. And even some companies that have embraced majority voting for directors give their boards discretion to overrule shareowners and reappoint incumbent directors who fall short of majority support in uncontested elections.
Campaign to Make Majority Voting a Listing Standard: On June 20 CII petitioned NYSE Euronext and the Nasdaq Stock Market to require listed companies to mandate that directors who fail to receive majority support step down from their boards and not be reappointed. Many CII members and other market participants have endorsed CII's petitions, including: members of the CII Advisory Council (NYSE, Nasdaq),California State Teachers' Retirement System (NYSE, Nasdaq), Florida State Board of Administration (NYSE, Nasdaq), Hermes Equity Ownership Services (NYSE, Nasdaq) and 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 push to make majority voting an exchange listing standard (see Campaign above and June 20 letters below)