Under the current default system, corporate directors are generally nominated by a company’s board of directors and elected by shareholders by a plurality of votes, according to a CalSTRS press release. This plurality voting standard allows corporate directors to be elected by the vote of a single share, unless, in rare cases, they are opposed by a dissident candidate who receives more votes.
State Senate Bill 1207 sets as a default policy that uncontested nominees to the board of directors of a California-registered public company must receive a majority of votes from the shareholders represented and voting in order to be elected. Shareholders would have the ability to vote against a nominee and nominees would be elected to the corporate board only if they receive a majority of the votes. The legislation aims to put the ultimate power over the election in the hands of the shareholders, the release said.
Congressional bill H.R. 4291 would require full disclosure of a company’s compensation plan for principal executive officers in their annual report and proxy statements. The bill would also require separate shareholder approval for any compensation plan, including “golden parachute” packages.
In addition, H.R. 4291 includes a provision that would require companies to adopt policies in which all principal executives return compensation to corporations. The policy would also apply to compensation for performance that does not meet stated measures, compensation as a result of fraud and unearned performance-based compensation as a result of restatement.
“We have been working for decades to improve transparency at the board level and have fought tirelessly to make our voice as shareholders heard,” said Jack Ehnes, CalSTRS chief executive officer, in the release. “While we have made great strides in engaging companies directly on these issues, these bills lend a strong and consistent legal framework.”