When Sara Lee shareholders approved a proposal allowing themto amend the corporation’s bylaws by a majority vote, they appeased at leastone large shareholder. In March, California Public Employees’ Retirement System(CalPERS) singled out Sara Lee (and 10 other corporations) on its annual FocusList for “lagging stock, financial, and governance performance.”
Lastweek at its annual meeting, nearly 81 percent of the votes cast by shareholdersfavored a nonbinding CalPERS resolution aimed at amending the bylines at thebig food company.
Sara Lee shareholders also rejected a proposal requesting anadvisory vote on executive compensation.
“We nowurge Sara Lee to respond favorably to the wishes of the company’s owners asexpressed in this very strong vote,” said Russell Read, chief investmentofficer of CalPERS, in a statement. “The right to amend bylaws is an importanttool for improving the company’s governance practices.”
Theresolution asked for a majority vote standard to amend the bylaws since asupermajority vote can be almost impossible to obtain because of abstentionsand broker non-votes. CalPERS has frequently noted that Sara Lee is one of thevery few companies in the Standard & Poor’s 500 that does not allowshareowners to amend the company’s bylaws.
CalPERSnamed Sara Lee to its 2007 Focus List of underperforming companies on thebylaws issue and related supermajority voting requirements pertaining tobusiness combinations, director removal, and shareowners’ ability to act bywritten consent. The decision to include Sara Lee was based on a review of itsperformance compared to its peers in the S&P 500 and the S&P FoodProducts Industry Peer Group.
“Thelong term performance of all 11 companies is at least 20 percent behind theirpeers, and they have resisted appeals to change corporate practices that maketheir boards unresponsive to shareowner interests,” said CalPERS boardpresident Rob Feckner, when the list” was released. “In severalcases, their entrenched boards refuse to discuss our grievances.” The pensionfund giant, which owns 4.2 million shares of Sara Lee, noted then that Sara Leeallows no opportunity for shareholders to amend bylaws, using restrictionsemployed by only four percent of S&P 500 companies.