Some Early Returns from The Shareholder Meeting Scene: What’s Hot – And What’s Not

What’s the hottest thing for corporate citizens to be worried about as we head into the big spring meeting season? It’s making sure that all your directors get elected with comfortable margins, we opined in a recent webcast.

Last year, we pointed out, about 1% of all the directors running for election failed to get 50% or more of the votes in favor. Sounds like a small number - and it is, we guess. But if it’s one of YOUR directors, hold on to your hats - and hope to hold onto your jobs, dear readers. Directors do not like surprises like this. And if they are not at 90% or better, they will want to know why…and yes, it is indicative of a problem somewhere.

Also, please know that the 1% failure rate does not take into account the number of directors who resign before the meeting, to save the embarrassment of losing. We saw this at three companies we follow last year…and we are sure there were many others.

We also expect that shareholders will raise the stakes even higher this year, as many have vowed to do: If you have very-long-tenured directors, a lot of ‘old-timers’ - like really old - or, heaven forbid, any directors who look “over-boarded” - and especially if your board lacks industry, ethnic, age and/or gender diversity – watch out. Institutional investors are looking harder than ever at such companies, and vowing to selectively withhold votes to take down the weakest-looking creatures in the herd…

Another hot item - almost a tie for top issue - is getting your say-on-pay ratified by 90% or more of the shares voted. Here too, directors don’t want any surprises. This year, we have revised our old saying that 80% is like the old 50% when it comes to “passing percentages” on SOP proposals: The old 80% hurdle is now a 90%+ vote. Or else…

Hotter than hot, however, will be the outcomes at the numerous big-company meetings where activist investors are looking to replace multiple directors - and sometimes the whole board - as currently being threatened at United Continental and Yahoo.

What’s NOT SO HOT in our book? Those proxy access proposals, where, as we keep saying, the dealin’s are essentially over, like it or not. Companies that push back too hard in their proxy statements - or foolishly look to put higher ownership thresholds in place – may find themselves in a heap of trouble with their top-20- to-50 holders…NOT a good place to be…