New York City Comptroller Scott Stringer, on behalf of the city's $160 billion pension funds, has announced an initiative that could give shareowners a greater ability to nominate directors at U.S. companies.
With what is called the Boardroom Accountability Project, Stringer has filed 75 proxy access shareowner proposals requesting bylaws that give shareowners who meet a threshold of owning three percent of a company for three or more years the right to list their director candidates, representing up to 25 percent of the board, on a company’s ballot. The proposals will be subject to shareowner votes in 2015 at those companies that do not agree to the request.
Currently, CEOs and/or directors pick nominees—often themselves—for election, and “the shareowners’ right to nominate directors to run against these individuals is largely illusory,” Stringer said in a statement. Because corporate directors are generally elected by a plurality of votes in uncontested elections, a director who owns one share of a company can re-elect his or her self, even if every other shareowner votes against that person, he explained. Of 41 directors who failed to receive majority votes in 2014, 40 remain on the board as “zombie directors,” unelected but still serving.
The 75 proposals were filed based on three priority issues: climate change, board diversity, and excessive CEO pay. Resolutions were filed at: 33 coal, oil and gas, and utility companies; 24 companies with few or no women directors, and little or no apparent racial or ethnic diversity; and 25 companies that received significant opposition to their 2014 “say-on-pay” advisory vote on executive compensation. Among the companies targeted were Exxon, eBay, Chipotle, Electronic Arts, Staples, Hasbro, and Duke Energy. A full list of companies can be found here.
Universal proxy access was originally proposed by the U.S. Securities and Exchange Commission in 2003, a reaction to accounting scandals at Enron and WorldCom. In 2010, that the SEC approved a universal proxy access rule and the Dodd Frank Act affirmed that authority. However, a lawsuit filed in 2010 in the Federal District Court for the District of Columbia by the Business Roundtable and U.S. Chamber of Commerce successfully vacated the rule on procedural grounds. Despite the decision, the SEC does still allow “private ordering,” the ability to file individual shareowner resolutions requesting proxy access.
Stringer serves as the investment advisor to, and custodian and a trustee of, the New York City Pension Funds, composed of the New York City Employees’ Retirement System, Teachers’ Retirement System, New York City Police Pension Fund, New York City Fire Department Pension Fund and the Board of Education Retirement System.