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January 05, 2011
CalPERS' Majority Vote Initiative Results in 20 Companies Adopting the Standard
    by Robert Kropp

Launched by the pension fund last March, the Majority Vote Initiative asks 58 companies to voluntarily adopt a majority vote standard in uncontested board elections.

Last March, California Public Employees' Retirement System (CalPERS), the nation's largest public pension fund with approximately $221 billion in assets, established the 2010 Majority Vote Initiative, asking 58 of the top US companies in its portfolio to voluntarily adopt a majority vote standard in uncontested elections for corporate directors.

Although most S&P 500 companies have adopted policies for majority vote standards for director elections, most US-based public companies maintain a plurality standard, by which an uncontested candidate can win election with one vote.

"The policy should include the required resignation for any director that receives a withhold vote greater than 50 percent of the votes cast," said George Diehr, Chair of CalPERS' Investment Committee.

In a recently published
press release, CalPERS announced the results of its Majority Vote Initiative thus far. Of the 58 companies with which the fund has engaged, 20 have implemented or committed to adopting a majority vote standard.

Anne Simpson, who heads CalPERS' corporate governance program, said of the 20 companies, "They will be joining more than 80 percent of S&P 500 companies and 60 percent of Russell 1000 companies that have adopted some form of policy for director resignations or majority vote standards for director elections."

According to the press release, CalPERS intends to file shareowner proposals for majority vote at Annaly Capital Management, Apple, BB&T, and V.F. Corp. The fund continues to engage with the remaining 34 companies and will file proposals if necessary.

Although a majority vote standard was included in the Senate version of financial regulatory reform legislation passed last year, it was not in the House version, and did not make it into the final version of the bill despite the support of sustainable investors at the
Social Investment Forum (SIF). In a letter sent to Senate and House conferees at that time, Lisa Woll, the CEO of SIF, wrote, "Shareholders need majority voting and proxy access to foster greater accountability and oversight in America's boardrooms."

Peter DeSimone, the Director of Programs at SIF, described the majority vote standard to as "a basic democratic principle, and one that would restore accountability in the market without costing the US taxpayer anything. It's a market-based reform, which means that shareholders hold directors accountable without the necessity for regulatory oversight."

In announcing the results of CalPERS' initiative, Joseph Dear, the fund's Chief Investment Officer, said, "Too often board elections are more like a coronation than an election. The majority vote is an effective tool for holding directors accountable for creating shareowner value and encouraging better shareowner-director communication."


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