US - The US$183bn California Public Employees' Retirement System (CalPERS) is set to consider on Monday a change to its corporate governance principles to allow Board directors to be elected by a majority vote of stockholders.
The proposal, which will be considered by the fund’s investment committee, is a change from common practice in the US, according to CalPERS.
“In the United States, corporate directors are generally appointed by the Board and ‘elected’ by shareowners by a plurality of votes,” chief investment officer Mark Anson wrote in his proposal to the committee.
“Plurality vote means that corporate directors can be elected by the vote of a single share unless they are opposed by a dissident candidate, which is extremely rare.
“This situation has led to ironic situations in which directors have received significantly less than 50% of the shares voting yet remain on the Board… Clearly, the circumstances in which directors are not accountable to the vote of the shareowners is an impediment to effective oversight and monitoring.”
Anson referred to the UK and Australia, two markets in which majority vote is the norm, when advocating the move. He said the two countries would serve as “useful benchmarks” in pursuing the reform in the US.
Under the proposal, a clause would be added to CalPERS’ Corporate Governance Core Principles stating: “A majority of shareowners should be required to elect, or effectively remove, directors.”
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