December 30, 2009
It is scandalous that any board member anywhere can be "elected" by receiving a single vote. This effectively disenfranchises the shareholders of the company. Unless they have the resources to mount an expensive proxy fight, it leaves them powerless to make any changes in the composition of the board, and thus powerless to exercise any control over the way the company is run. They are nominal owners only, without any power whatsoever over the board that supposedly represents them, or the company they supposedly own. It is abusive practices like these that lead to the record HIGH levels of executive compensation and to the existing record LOW levels of dividend payouts that currently exist. The SEC should make it mandatory, for ALL companies under its control, that a board member can only be elected to office if they receive a MAJORITY of the votes cast.
I also believe that any shareholder should have the right to have their board member nominations included in the proxy material. It seems like a basic right, no matter how many or few shares they have, or how short or long a time they have owned the shares. This may be abused, and lead to a long list of potential board members, possibly without any particular qualification for the job, but any potential board member recommended by a shareholder is by definition a better candidate than one whose nomination was influenced by the CEO or any non-independent member of the board. Asking the CEO, or any non-independent board members to participate in the nomination of board members is like asking the fox to guard the hen house. The main reason board members EXIST is to monitor the performance of the CEO. It is counterproductive in the extreme to allow the CEO any input into the board members nominated. And indeed, I would strongly recommend that the SEC require that nominating committees contain NO non-independent board members and accept NO inputs or recommendations from them or from the CEO.
I would also strongly recommend that all companies be required to publish IN THE PROXY MATERIALS the complete voting record of each board member up for re-election in the following areas:
1) yes/no votes on any financial compensation awarded to senior executives or members of the board, including increases to base pay, bonuses, stock options, repricing of stock options, awarding of subsidized loans, perks, fringe benefits, payment of dues of club memberships, provision of retirement or health care plans more generous than those given to non-executive employees, and 'golden parachute' awards of ANY KIND.
2) yes/no votes on whether or not to issue a dividend, and yes/no votes on the percentage of earnings to be retained, and the percentage of earnings to be disbursed to shareholder as a dividend.
3) yes/no votes on any poison pill provisions that are voted upon, and
4) yes/no votes on any mergers, acquisitions, or spin offs that have been contemplated.
These are TOP LEVEL decisions. How board members vote on these issues should be available to shareholders at the time when the elections to the board take place so that the shareholder is CAPABLE of evaluating whether or not they wish to continue to be represented by that board member.
These issues, more than any others, are where executives and/or board members most frequently and notoriously fail to act in the best interests of the shareholders. If the SEC required the voting records of each board member in these basic issues to be supplied to shareholders in the proxy material, the shareholders would have basic information they need to evaluate the performance of the board members they are being asked to vote upon.