Shareholders Increasingly Hold Directors' Feet to the Fire Via Withhold Votes, Says PROXY Governance

A recent study by corporate governance advisory firm PROXY Governance, Inc. (PGI) shows an increasing desire on the part of shareholders to make director elections a genuine referendum on the qualifications and judgment of directors, rather than a simple rubber-stamp of the board. The study, Elections that Matter: A Review of Director Votes in 2008, examines the rising tide of "withhold votes" in proxy voting

Vienna, VA (PRWEB) October 15, 2008 -- A recent study by corporate governance advisory firm PROXY Governance, Inc. (PGI) (http://www.proxygovernance.com) shows an increasing desire on the part of shareholders to make director elections a genuine referendum on the qualifications and judgment of directors, rather than a simple rubber-stamp of the board.

"The study demonstrates that shareholders are increasingly using their proxies to register discontent with the performance of directors - and the current state of the financial markets will likely only serve to increase that trend," said author and analyst Quinton Huckeby.

The study, Elections that Matter: A Review of Director Votes in 2008, examines the rising tide of "withhold votes" in proxy voting.

Among the trends observed:

A year-over-year increase in the percentage of directors garnering high (20% or more) withhold votes; however, the percentage of directors receiving withhold votes of 20% or more remains under 6%.

An even greater year-over-year increase in the percentage of directors receiving majority or near-majority (40% or more) withholds; the primary reasons being poor attendance, questions of independence, adoption or renewal of a poison pill without shareholder approval, failure to implement past majority-supported shareholder resolutions, and mishandling of takeover bids.

Directors who received high withhold votes in 2007 generally received even higher withhold votes in 2008, with compensation committee members particularly likely to receive high opposition votes.

Although the opposition levels are rising, so far in 2008, no director at a company with majority voting failed an election (compared to one in 2007).

Most companies whose directors receive majority withhold votes take at least some action to ameliorate shareholder concerns within the following year, although this does not typically result in a director's removal from the board.

The report further explores the importance of discretionary broker votes in the voting process and the potential impacts that the elimination of such votes could have on voting outcomes and the potential for failed elections when coupled with a majority vote standard. Additionally, it examines the increasing prevalence of so-called "Vote No" campaigns, as well as a general broadening of the overall criteria for opposing board members.

Copies of the report are available by calling PGI at 703-245-4855.

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