Tags: Stewart | shareholder | directors | votes

NYT’s Stewart: Shareholder Democracy Is Less than It’s Made Out to Be

By    |   Tuesday, 16 April 2013 07:56 AM

This is supposed to be the era where shareholders have more say in the companies they own, but it’s not exactly working out that way, says New York Times columnist James Stewart.

At 41 companies last year, directors lost their elections – i.e., less than 50 percent of shareholders voted in favor of them – yet retained their seats anyway, he writes.

It turns out that companies don’t have to abide by shareholders’ votes. Many corporations use a plurality voting system in which directors don’t face any opposition.

Editor's Note:
 
Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

“It’s appalling,” Nell Minow, co-founder of GMI Ratings, a corporate ratings company told Stewart. “It’s the No. 1 issue in corporate governance.”

At cable giant Cablevision Systems, three directors were rejected by shareholders in two of the last three years and garnered only small majorities in the other. But they still maintained their board positions.

“The fact that all three directors remain on the board suggests that one of the few rights” afforded shareholders is ‘illusory,’” New York City’s comptroller, John Liu, wrote in a letter to the company. Liu is in charge of the city’s pension funds, which own Cablevision shares.

Even companies that use a majority voting system can refuse the resignation of losing directors.

The nation’s largest pension fund, California Public Employees’ Retirement System (CalPERS), is fighting to eject these so-called “zombie directors” from corporate boards. CalPERS found 52 directors who have failed to win shareholder votes but either stayed in place or were subsequently reinstated, according to the Financial Times.

If companies lack majority voting requirements, shareholders have little power to force out board directors. The pension fund, the Times reports, hopes to persuade the Securities and Exchange Commission (SEC) to issue proxy access rules that would help shareholders elect their own board directors and make it easier to eject board members.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

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This is supposed to be the era where shareholders have more say in the companies they own, but it’s not exactly working out that way, says New York Times columnist James Stewart.
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2013-56-16
Tuesday, 16 April 2013 07:56 AM
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