A shareholder resolution calling for directors to be elected each year was rejected on Wednesday at Commerce Bancshares Inc.’s annual meeting. The proposal, submitted by Gerald Armstrong, received a 45 percent vote in favor for the proposal.
David W. Kemper, chairman and chief executive of Commerce, believes that annual elections would ultimately make little difference in the way the company operates. Its current practice is electing smaller groups of directors for three-year terms. Part of their reasoning is that this method promotes stability.
Shareholders believe director elections are the main influence they have on corporate governance. Terms spread out over any period longer than a year is viewed as an impediment to corporate change.
CalPERS meanwhile, is seeking to replace Standard Pacific’s current classified board structure with an annual directors election. The idea is that directors will be more accountable for the company’s performance.
As of March 31, 2008, Standard Pacific’s stock was seriously underperforming. The company has trailed behind competitors by 83 percent over the past five years, which has landed Standard Pacific on CalPERS 2008 Focus List.
Standard Pacific’s classified board, 80 percent supermajority voting requirements for amendments to company articles and bylaws, and the lack of a majority voting standard for directors in uncontested elections, are believed to cater to the company’s overall underperformance.
Shareholders demanding director accountability annually is on the rise and this trend will likely be the focus of future annual meetings.