WALL STREET JOURNAL.
Corporate Board Elections Getting a Little Less Cozy
This year, 478 nominees for U.S. board seats failed to win support
from a majority of voted shares, a 39% jump from 2015
BlackRock issued voting guidelines indicating that it expected
boards to have at least two female directors. PHOTO: LUCAS
Oct. 8, 2019 7:00 am ET
For decades, elections for corporate boards carried
little suspense. Most candidates ran unopposed and won by a landslide.
But board votes are no longer such a sure thing.
This year, 478 public-company directors failed to win the support
of a majority of voted shares, up 39% from 2015, according to a
Broadridge Financial Solutions
Inc., which processes proxy votes for companies, and consulting firm
A total of 1,726 directors failed to
secure support from at least 70% of voted shares, according to the ProxyPulse
report, produced jointly by the two companies. The analysis covered about 4,000
U.S. companies holding annual meetings between Jan. 1 and June 30, the peak
period for board votes.
Despite the rise in rejections, only a fraction of directors were
snubbed by shareholders: There were 22,520 directors who stood for election
during this period in 2019. On average, directors won 95% of the vote, the study
At some companies, boards can choose to retain directors that
fail to win majority support, but the practice is frowned on by investors.
Increasingly, investors have sought rules requiring directors to win a majority
of shares voted to retain their seats.
Most directors losing shareholder support aren’t at companies
involved in proxy battles—in which activist investors seek to replace board
with candidates of their own,
such as at
Procter & Gamble
Co. in late 2017 or at
More typically, investors vote against incumbents without seeking to replace
Among the 500 most widely held public companies—which are
generally also the biggest—50 directors failed to win a majority of shares voted
in 2019, compared with 15 recorded in 2015. The number of directors failing to
win at least 70% of the vote more than doubled to 170, from 69.
When directors lost shareholder support, it tended to reflect
lack of confidence from institutional investors rather than individual
shareholders, the analysis found. That is because small investors can more
easily sell their shares if they don’t like a company’s practices, said Chuck
Callan, Broadridge’s senior vice president for regulatory and corporate affairs.
“If they don’t like a stock, they’ll vote with their feet,” Mr.
Callan said. By contrast, many institutional investors have little choice but to
stay, in some cases because they manage index funds or other portfolios obliged
to hold stakes in certain industries or companies.
Investors appear most likely to withhold support for members of
board nominating and governance committees, said Paul DeNicola, principal of
PwC’s Governance Insights Center. That likely reflects the increased interest
among institutional investors in diversity and other board-composition issues.
In early 2018, for example,
Inc. —the world’s biggest asset manager—issued
indicating that it expected boards to have at least two female directors.
Investors have avenues other than board votes to protest other
kinds of concerns. Investors unhappy with executive-pay practices, for example,
can vote down regular “say on pay” advisory votes over a company’s compensation
program, Mr. DeNicola said.
Theo Francis at