Number of 'Poison Pill' Companies Continues to Decrease, Study Finds

Public companies in the United States continue to grow in their governance practices, especially those relating to voting matters, as they now also grapple with Securities and Exchange Commission disclosure requirements around executive and director compensation, according to Shearman & Sterling's fifth annual corporate governance survey of the largest U.S. public companies.

The law firm's findings, which are primarily based on an in-depth analysis of the proxy statements of the top 100 U.S. public companies, found that  between 2004 and 2006, some of the most intense shareholder pressure was focused on the voting standards in director elections, which as resulted in a dramatic increase in the number of companies using a majority voting standard.

What's more, as a result of continued shareholder pressure, the number of companies with "poison pills" and/or classified boards continues to decrease. Of the 100 companies surved this year, 17 had poison pills in place, as compared to 33 of the companies surved in 2004; and 33 percent of the companies surveyed had classified boards, a marked decrease from 54 in 2004.

This year's survey comes in two parts -- the fifth annual examination of general governance practices and a new annual report on executive and director compensation practices. "We continue to see increasingly active involvement by shareholders seeking to influence corporate strategy and direction," said John Madden, Shearman & Sterling's co-managing partner. "We are also seeing a greater role being sought by shareholders in the director election process, as well as a paring back of structural takeover defenses."

"On the executive compensation side," he added, "our survey indicates that increased disclosure continues to be both a regulatory requirement and a corporate priority."