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.

The board of directors is the first line of defense for shareholders. As agents for investors, directors have a responsibility to make decisions in the company's best interest. That's why CII pays close attention to how directors are elected and removed. CII advocates for director elections that carry real consequences. For many decades, nearly all directors who stood for election unopposed won their seat upon receiving a single favorable vote, and thousands of companies continue to operate under this standard.  

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. Although nine in 10 S&P 500 companies use the majority vote standard for uncontested director elections, thousands of U.S. companies still use the old method. Across the Russell 3000, a slight majority (52 percent) still have plurality voting for uncontested elections. The gap between large cap and smaller cap practices is due in no small measure to the greater attention large companies receive from filers of shareholder resolutions.  

CII's FAQ on majority voting
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.

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)

Resources
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