Disgruntled shareholders may have targeted financial company boards with “vote no” campaigns for poor performance, but when all the votes were tallied, most directors prevailed.
The American Federation of State, County, and Municipal Employees (AFSCME), and the California Public Employees’ Retirement System (CalPERS) pension fund urged fellow shareholders to vote no against Citigroup’s John Deutch, C. Michael Armstrong, and former lead director Alain Belda. AFSCME argued that the directors “failed to effectively manage risks, helping cause the company’s current instability and increasing volatility in the global financial markets.” Even so, all three directors were re-elected with at least 70 percent of the vote during the company’s annual shareholder meeting on April 21.
A week later, tempers flared during Bank of America’s annual meeting as shareholders voiced their dissatisfaction with company CEO Kenneth Lewis and its board. In the end, all 18 BofA directors, including Lewis, were re-elected by a comfortable margin. The results came despite vote-no recommendations from shareholder advisory groups RiskMetrics and Glass Lewis. Of the eight shareholder proposals, only one passed, forcing Lewis to relinquish the chairman post while holding on to his roles as CEO, president, and director. AFSCME’s Richard Ferlauto believes one major obstacle to the “vote no” campaigns was broker votes. “Broker votes are still consequential and can be as much as 15 percent, which may result in re-electing directors, even if they did not get a majority vote from shareholders,” he says.
Should shareholder campaigns against directors gain traction, Peter Gleason, CFO of the National Association of Corporate Directors, worries that campaigns to remove directors could lead to consequences, such as a talent drain on boards. “I can see directors being voted off because they aren’t doing a good job, but to not recommend someone because you don’t like the company’s compensation plan by voting off someone who is not even on the comp committee—that will result in companies losing valuable talent.”
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John J. Donahoe, president and CEO of eBay, and Frank D. Yeary, vice chancellor of the University of California Berkeley, will join Intel’s board. Donahoe has served as CEO of eBay since 2008. Yeary is an advisor to the chancellor. Both appointments come after the departure of Carol A. Bartz, now CEO of Yahoo.
Pharmaceutical company Geron Corp. named Karin Eastham to its board. She will serve as chair of the audit committee. Eastham currently serves on the boards of several life-sciences companies, including Amylin Pharmaceuticals, Illumina, and Genoptix. Revlon elected Ann Jordan to its board. Jordan currently serves as a director of Catalyst, a non-profit membership organization for women’s business initiatives. She previously served on the boards of Johnson & Johnson, Citigroup, Automatic Data Processing, and Allied Security Services.
Michael R. Armellino, a retired partner and CEO of the Goldman Sachs Group’s asset management division, was named to Armanta’s board.
Pharmacy chain Rite Aid named David R. Jessick to its board. Jessick is currently an independent investor and served the company as CAO from 1999 to 2002. He then served as a consultant to Rite Aid’s CEO and senior management from 2002 to 2005.
PepsiCo named Shona L. Brown to its board. Brown is senior vice president of business operations at Google, a position she has held since 2006. From 2003 to 2006, she served as Google’s vice president of business operations. Eduardo Baer was named to Firstgold’s board. Baer is former CEO of European Goldfields, a mineral exploration company.
Anthea Stratigos, co-founder and CEO of Outsell, was elected to the board of outsourcing firm Innodata Isogen. Stratigos is Outsell’s primary spokesperson and chairs the company’s leadership council.
Nortel Networks has appointed David I. Richardson to its board. Richardson is a former executive at Ernst & Young and served as the senior partner in the company’s corporate recovery and restructuring practice until 2002.
Unitil named William D. Adams to its board. Adams is president of Colby College in Waterville, Maine. He previously served as president of Bucknell University.
William T. Fejes Jr., COO of Seakeeper, a company specializing in motion stabilization of boats, has been named to Broadwind Energy’s board. Fejes previously served as president and CEO of TB Wood’s.
Overture Technologies named J. Barry Morrow to its board. Morrow was president and CEO of Collegiate Funding Services until its acquisition by JPMorgan Chase in 2006.
Zila, a provider of oral health services, has named Jon Plexico to its board of directors. Plexico is currently general partner of Stonepine Capital Management. He previously served as managing director of Merriman Curhan Ford, a financial services company.
James Johnson, former chief legal officer of Procter & Gamble, has been elected to the board of directors at Cintas Corp., bringing the number of board members to 10. Johnson will also serve on a newly formed special litigation committee that will investigate allegations in a previously disclosed shareholder lawsuit.
Credo Petroleum named Marlis E. Smith Jr. to its board. Smith is managing partner of Smith/ Drummond Holdings.
James Lam has been appointed to the board of Covarity, a commercial loan monitor. Lam is the author of the bestselling book Enterprise Risk Management: From Incentives to Controls. He was named one of the “100 Most Influential People in Finance” by Treasury & Risk Management magazine.
Mikhail Leibov joined Powersafe Technology’s board. Leibov was CEO and chairman of Corbina Telecom, one of the largest telecom carriers in Russia.
Inovio Biomedical appointed Ng Tee Khiang to its board. He is co-founder, partner, and director of multiple investment companies, including Evia Capital Partners and Evia Growth Opportunities.
Paul O’Callaghan resigned as CEO of software provider Jacada and will be succeeded by Thomas H. Clear. Most recently, Clear served as president and COO of Spinvox.
John R. Holder was elected to the Oxford Industries board. Holder is chairman and CEO of Holder Properties, a privately held full-service commercial real-estate developer.
Colorep has appointed David Gelbaum to its board of directors. Gelbaum is a trustee of The Quercus Trust, one of North America’s largest clean technology funds.
Brett G. Durrett, vice president of engineering and operations at IMVU, was named to the board of Equilibrium. Durrett leads the engineering and technical operations teams of IMVU, a social networking site.
Travis Connors was appointed to uTest’s board. Connors is a partner at Egan-Managed Capital and serves on the boards of Envista Software, Owner IQ, and Pyxis Mobile.
Yes, it would be a shame to remove directors simply because they served on a committee that recommended something shareowners don’t like. Perhaps this might be avoided if directors are vocal about dissenting votes. As long as board meetings are a black box and directors provide no indication of their position on substantive issues prior to election, what choice do shareowners have?
Jim McRitchie echoes sentiments felt across the boardroom world. However, until we see safe harbor regulation that would permit board directors to reveal dissent openly, the plaintiff bar will continue to monitor any hint of dissent as fair game for director liability and shareholder class actions. It is called “mining the minutes” and the plaintiff bar will use any detour from ordinary procedure as a cause for claim. There is one case of a major telecom merger, perhaps the largest in history, in which one director dissented initially. Corporate counsel explained that a dissent at this time would bring on such significant litigation that the board would be forced to reject the merger under the circumstances. The director was not trying to derail the merger, only to voice his opinion that he felt the terms were not optimal. He changed his vote.