Just in time for Halloween, the Council of Institutional Investors has gone “zombie” hunting.

In letters sent yesterday to the American Bar Association and the Delaware State Bar Association, CII—a non-profit association of pension funds and foundations that advocates on corporate governance and shareowner issues —urged a crackdown on so-called “zombie” directors on corporate boards. It asked the associations to support a requirement for majority voting in the uncontested election of directors, specifically by amending the Model Business Corporation Act and Delaware General Corporation Law.

CII presented them with proposed revisions to current standards governing director elections. They would require directors in uncontested elections to be elected by a majority of the votes cast. Any director who fails to receive a majority of the votes must leave the board, with only a “modest” transition period allowed. In contested elections, plurality voting would apply.

A recent study by Investor Responsibility Research Center Institute found that only 5% of 175 director nominees at Russell 3000 companies who failed to win majority support in the last three years actually left their boards. Even some companies that adopted majority voting for directors let zombie directors stick around, it found.

“Directors who lack the support of the shareowners they represent should not serve,” Ann Yerger, CII's executive director, said in a statement.” Majority voting ensures that shareowners' votes count and makes directors more accountable. Plurality voting for directors results in rubber stamp elections.”

The letters mark the latest effort by CII to persuade the American Bar Association Business Law Section's Committee on Corporate Laws and the Council of the Corporate Law Section of the Delaware State Bar Association to modernize their standards for director elections.

Yerger said the ABA and Delaware “continue to embrace an antiquated system that coddles undeserving directors.” Upgrading Delaware's corporate law rules is critical, she added, because nearlyhalf of all U.S. public companies are incorporated in the state.

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