Season 007: Shaken and Stirred

Like the fictional Bond movie series, the season produced some blockbuster sequels. Investors continued to back long-running campaigns seeking annual boardroom elections, shareholder approval of poison pills, and simple majority votes for all corporate actions.

Directors' rave reviews for majority threshold voting (MTV) requirements in boardroom elections morphed the reform from progressive to common practice.

The season's breakout hit— Say on Pay, or SOP—appeared at first glance to owe more to Dr. Seuss than cinema's most famous secret agent, but it packed a significant wallop both at annual meetings—appropriately, the first majority support came at video chain Blockbuster—and on Capitol Hill.

Securities and Exchange Commission Chairman Chris Cox stepped easily into the shoes of Bond gadget maestro "Q." The Cox Commission's off-season moves to revamp executive-suite and boardroom pay disclosures provided shareholders and directors with a truckload of shiny new toys.

While issuers had trouble deciphering the instruction manual, the Compensation Discussion and Analysis (CD&A) section provided the biggest fits for investors. Shareholders slogged through the wordy (5,000-plus on average), finely printed blocks of legalese in search of the promised payoff— indicators of linkage between pay and performance. These hopes were dashed about half the time, however, when some directors made dubious claims that performance targets should remain redacted due to their potential value to company competitors.

Heroes and scary villains also filled the proxy-season screen. Perhaps the biggest ensemble cast emerged from the burgeoning stock-option-backdating/grant timing scandal. Megastar executives such as KB Home's Bruce Karatz and UnitedHealth Group's Dr. William McGuire fell from grace in advance of their firms' 2007 meetings.

With most of the season's meetings now appearing in the rearview mirror, it's time to offer some capsule reviews (with a Bondian twist, of course) of the season's top issues and trends.

Dr. No Shareholders continued their push to strengthen the so-called "Just Vote No" campaigns via the spread of majority voting. Following up on the 2006 season, shareholders offered more than 135 proposals calling on boards to adopt majority voting in director elections. But fewer than 45 will likely make it to votes at 007 meetings. The tidal wave of negotiated withdrawals occurred when company after company agreed, prior to the annual meeting, to adopt gold standard MTV policies (following the Intel model, not the weaker Pfizer one).

These so-called "voluntary" adoptions swelled the number of companies with enhanced-election accountability rules to more than 300, including more than half of the firms in the S&P 500. Majority votes on nonbinding proposals at International Paper, IBM, Union Pacific, and elsewhere should accelerate this trend.

Despite momentum for MTV, Vote No campaigns didn't gain the same traction as in past seasons. The 007 protests largely fell on deaf ears because the situations were either moot (44 percent of shareholders voted "no" at CVS/Caremark to protest a poor bidding process surrounding a deal that won shareholder approval) or quixotic (42 percent of the vote was withheld for directors at the New York Times Co. to protest the company's dismal performance and its protective dual-class structure that, of course, frees the board to ignore the "no" vote).