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By Yin Wilczek
May 6 — So far in the 2015 season, the voting results for shareholder proxy access resolutions are mixed.
As of May 6, according to figures provided by Peter Kimball, vice president of ISS Corporate Solutions, 29 shareholder proposals have gone to a vote of which there are voting results for 21.
Kimball said that of the 21, 11 passed with an average support of 62 percent. These proposals mirrored the 3 percent/three-year threshold that the SEC included in its federal access rule that the U.S. Court of Appeals for the District of Columbia invalidated in 2011.
The proposals that failed received an average support of 43 percent, Kimball said. He added that Citigroup's proxy access resolution has received the highest support to date, at 86.9 percent. The resolution—submitted by activist James McRitchie—was supported by the bank.
Other voting results include:
• eBay—59.4 percent of shareholders voted for (passed);
• American Electric Power—67.2 percent voted for (passed);
• PACCAR Inc.—58 percent voted against (failed); and
• Arch Coal—64 percent voted against (failed).
Keir Gumbs, a Washington-based partner at Covington & Burling LLP, told Bloomberg BNA that whether shareholders support proxy access depends very much on the company in question, such as whether there are negative factors like perceived governance failures or executive compensation issues that may influence the shareholders’ view of the board.
Ning Chiu, counsel in Davis Polk & Wardwell LLP's New York office, said it may be too early to draw any conclusions about any trends. She noted that at AES Corp. and Exelon, where the companies presented both management proposals (with the 5 percent, three-year threshold) and shareholder proposals (3 percent/three-years), there were differing vote results. At AES, the shareholder proposal was supported by 66 percent and the management proposal was supported by 36 percent, she said. At Exelon, the shareholder proposal was supported by 44 percent and the management proposal by 52 percent.
Although many more companies have yet to hold votes on their access proposals, the voting results so far appear to indicate that proxy access at the proposed thresholds is not universally endorsed by investors, Chiu continued. “There are some major investors who support access but view those thresholds as too low, some who do not believe proxy access is necessary at all and some who are willing to consider the proposal on a case-by-case basis,” she said.
Gumbs predicted that by the end of the season, there could be as many as 120 proxy access resolutions, of which about half should pass. He also predicted that proxy access will be adopted by larger companies and rejected by smaller entities.
Moreover, Gumbs suggested that majority support for a resolution is not the end of the road in the fight between shareholders and companies over proxy access.
“The real question with proxy access will not be how many directors can get nominated or the minimum threshold of ownership,” Gumbs said. Once the companies craft their bylaws, there will be disagreements over the nitty-gritty details, such as how aggregation should work, the representations to be made by the shareholder or the company and how shares are counted, he said.
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