Sara Lee Shareholders Listen to CalPERS; Approve Majority Voting

When Sara Lee shareholders approved a proposal allowing them to amend the corporation’s bylaws by a majority vote, they appeased at least one large shareholder. In March, California Public Employees’ Retirement System (CalPERS) singled out Sara Lee (and 10 other corporations) on its annual Focus List for “lagging stock, financial, and governance performance.”

 

Last week at its annual meeting, nearly 81 percent of the votes cast by shareholders favored a nonbinding CalPERS resolution aimed at amending the bylines at the big food company.

 

Sara Lee shareholders also rejected a proposal requesting an advisory vote on executive compensation.

 

“We now urge Sara Lee to respond favorably to the wishes of the company’s owners as expressed in this very strong vote,” said Russell Read, chief investment officer of CalPERS, in a statement. “The right to amend bylaws is an important tool for improving the company’s governance practices.”

 

The resolution asked for a majority vote standard to amend the bylaws since a supermajority vote can be almost impossible to obtain because of abstentions and broker non-votes. CalPERS has frequently noted that Sara Lee is one of the very few companies in the Standard & Poor’s 500 that does not allow shareowners to amend the company’s bylaws.

 

CalPERS named Sara Lee to its 2007 Focus List of underperforming companies on the bylaws issue and related supermajority voting requirements pertaining to business combinations, director removal, and shareowners’ ability to act by written consent. The decision to include Sara Lee was based on a review of its performance compared to its peers in the S&P 500 and the S&P Food Products Industry Peer Group.

 

“The long term performance of all 11 companies is at least 20 percent behind their peers, and they have resisted appeals to change corporate practices that make their boards unresponsive to shareowner interests,” said CalPERS board president Rob Feckner, when the list" was released. “In several cases, their entrenched boards refuse to discuss our grievances.” The pension fund giant, which owns 4.2 million shares of Sara Lee, noted then that Sara Lee allows no opportunity for shareholders to amend bylaws, using restrictions employed by only four percent of S&P 500 companies.