As of now, a plurality vote system is used by most corporations for board elections, a system that allows directors to be elected by a vote of a single share unless opposed by dissident candidates. However, CalPERS wants to change this. Under its plan, the massive pension fund will:
- attempt to implement majority policies at individual companies through company bylaw and charter amendments
- pursue changes to state laws to implement majority vote where feasible
- seek to implement the majority vote concept at the Securities and Exchange Commission and major stock exchanges
- amend CalPERS Corporate Governance Core Principles and Guidelines to advocate majority votes for corporate directors.
CalPERS stated that the plurality vote system led to several situations in the 2004 proxy season where directors received significantly less than 50% of the shares voting yet remained on a company’s board. “Majority vote will give shareowners the power to hold directors accountable for their actions and their performance and elect the best person for the job,” said Rob Feckner, CalPERS Board President, in a statement.
This move echoes that of Institutional Shareholder Services (ISS), an influential proxy voting advisor for institutional investors. On Friday, ISS declared that it would support non-binding proposals seeking majority vote requirements in boardroom elections (See ISS Calls for Majority System for Board Voting ).