It won't be long before shareholders gather at annual meetings to vote on directors, executive compensation plans and other matters, including resolutions sponsored by shareholders who have the temerity to suggest there's a better way of doing things. Companies reflexively frown on these initiatives, which challenge the age-old wisdom that seasoned directors are best fit to govern the enterprise.
Such was the case last year at U.S. Steel's shareholder meeting. The company's board recommended that shareholders vote no on a proposal sponsored by an affiliate of Harvard University Law School's Shareholder Rights Project. The activist group wanted U.S. Steel to elect its entire board of directors annually. The company elects a third of its directors each year, a practice proponents believe promotes continuity and stability.
"It is a structure that has served our shareholders well throughout our history, and we believe that it would be a mistake to change it now," U.S. Steel said in proxy materials sent to shareholders. Shifting to annual elections "could lead to instability and precipitous short-term decisions that may benefit special interests but may be adverse to the longer term interests of all our shareholders," the company warned.
Shareholders felt otherwise. They supported a similar proposal in 2012. Last year, nearly 56 million shares were voted in favor of annual elections, four times more than the number of votes cast against the proposal.
A year later, U.S. Steel, invigorated by a new chairman and top management, has found religion. While still believing there are advantages to the old way, the steel producer is sponsoring a proposal to switch to annual elections and recommending that shareholders vote in favor of it at the April 29 annual meeting at company headquarters in Downtown Pittsburgh.
U.S. Steel is among the growing number of public companies that would rather switch than fight when it comes to the Harvard group, which is a coalition of institutional investors, public pension funds and a foundation that collectively manages more than $400 billion in assets.
Over the last three years, the group has sponsored annual election proposals at S&P 500 and Fortune 500 companies. At last count, nearly 120 companies targeted have agreed to switch to annual elections.
They include EQT, whose shareholders approved a company-sponsored proposal at last year's shareholder meeting. PPG Industries, another company targeted, also wanted to make the change. But its shareholders failed to approve the move by a large enough margin at their 2012 and 2013 meetings.
Wesco International's shareholders last year overwhelmingly approved a non-binding proposal for annual elections.
The industrial parts distributor had urged them to vote no, noting that its directors had been elected and reelected "typically by an overwhelming majority."
"Accountability depends on the election of responsible, ethical, qualified and experienced directors, not on whether they serve one-year or three-year terms," the company said in proxy materials.
This year, Wesco is recommending shareholders vote in favor of the change at the company's May 29 meeting at the Sheraton Station Square.
Although Allegheny Technologies was not on the Harvard group's list, shareholders will vote on a company proposal to require one-year director terms at the specialty metals producer's annual meeting, slated for May 1 in Salt Lake City. Directors are unanimously backing the proposal.
Better ways of electing directors are not the only idea shareholders have. More than 400 shareholder resolutions related to social and environmental issues have been filed for 2014 shareholder meetings, according to a coalition of groups supporting such proposals. The proposals cover issues such greenhouse gas emissions, human rights and political spending.
Shareholders of PNC once again will vote on a proposal requesting that the company issue a report on the greenhouse gasses emitted by companies it lends to and the bank's exposure to climate change risk.
The proposal is sponsored by Boston Common Asset Management. The Boston firm, which manages about $1.8 billion, submitted a similar resolution last year. It garnered about 23 percent of the vote.
PNC opposes the measure. In proxy materials filed in advance of its April 22 meeting in Tampa, the bank said it has adopted a number of environmental measures including promising to reduce its greenhouse gas emissions and energy consumption.
Mylan is again facing a proposal from New York City's comptroller, who wants the Cecil generic drug maker to require an independent chairman of its board. The position is currently held by former CEO Robert Coury. The comptroller argues putting a former CEO in charge of the board "makes it difficult for a new CEO to review and change past strategies" and "may delay the maximization of shareholder value."
The resolution is slated to be considered at Mylan's April 11 meeting in Washington, D.C. Mylan is urging a no vote, saying the proposal is based on "a rigid 'one-size-fits all philosophy that ignores the vitality and efficacy of our current leadership structure."
The proposal received 41 percent of the vote at the 2013 meeting, up from 35 percent the previous year, the comptroller said.
Len Boselovic: email@example.com or 412-263-1941.