Very few directors will find shareholders withdrawing support, according to a study conducted by The Corporate Library. Out of 3,000 U.S. companies, 18 directors did not receive support from the majority of shareholders at 2006 and 2007 annual meetings—but when they did withhold support, boards seldom listened to them.
Two-thirds of these directors continued to serve despite the dissatisfaction among shareholders, according to the report titled, “Shareholders Say No, Boards Say Yes.”
According to Senior Research Associate Annalisa Barrett, the study’s co-author, “The data suggested that shareholders rejected these directors for a variety of reasons, primarily independence concerns and attendance problems.”
The overall impact of the disapproval was surprisingly minimal as “boards seem to need that push provided by majority voting to take shareholders’ seriously.” Only three of the companies had adopted any form of majority voting for director elections.
The Corporate Library’s 2008 Proxy Season Foresights series predicts that the 2008 season will be much more controversial as tussles between corporations corporations, lawmakers, and investors becomes more aggressive.