When General Electric Co. last week released material for its 2015 annual meeting, missing was one of this year’s hot-button issues: a “proxy access” proposal.
The phrase denotes the demand that boardrooms become a bit more open by giving big shareholders a greater say in the election of directors.
Spring marks the start of public company meeting season, a time when management apprises shareholders of how their investments are doing and shareholders assess management’s stewardship. The annual meetings can be big, glitzy affairs or small and subdued, attaboy cordial or confrontational.
Often a couple of issues bubble up to become common themes in each year’s crop of proxies — the document that lays the groundwork for the annual meeting. In 2012, “say on pay” (giving shareholders an advisory say on executive pay) was a popular meme; in 2014, it was corporate campaign spending.
This year, it’s proxy access, which has surfaced for shareholder consideration at some 100 annual meetings. Many of the proposals came from the same source: New York City Comptroller Scott Stringer, who oversees Big Apple pension funds and their stakes in public companies.
Last fall, Stringer announced the Boardroom Accountability Project, with “proxy access” at its core. He submitted proposals to 75 public companies for deliberation this year, seeking bylaw changes to allow holders of at least 3 percent of a company’s stock for three years to offer nominees for director seats.
Most times, directors are handpicked by an incumbent board or company executives, which critics say can lead to “group think” and stymie financial performance.
While the idea of proxy access has been around for at least a decade, opponents have fought hard to keep it at bay, citing costs, a heightened chance of electing special-interest directors and its unknown effect on long-term shareholder value.
But Stringer’s efforts already have borne fruit: A handful of the companies he targeted have said they’ll implement proxy access without waiting for shareholder votes at annual meetings. And other companies not on Stringer’s list also took that route, including GE.
GE pledged last month to let so-called 3/3 shareholders (owning 3 percent of stock for three years) nominate directors. In the material filed with regulators last week, GE indicated that for 2016, it would allow groups of qualified owners (up to 20 shareholders each) to nominate as many as three directors, or 20 percent of the board.
Nominations are due between Oct. 11 and Nov. 12 this year for the company’s annual meeting next spring, according to GE.
The Wall Street Journal called it “unusual” that GE would adopt the bylaw change without taking proxy access to shareholders at the April 22 annual meeting.
A GE spokesman, though, told the newspaper that after deliberations in an annual governance review and discussions with shareholders, the company saw proxy access as “appropriate at this time.”
Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at [email protected].