SUPPORTING STATEMENT: Arthur Levitt, former Chairman of the Securities and Exchange Commission, said, “In my view, it’s best for the investor if the entire board is elected once a year. Without the annual election of each director, shareholders have far less control over who represents them.”
Since directors in a declassified board are elected and evaluated each year, declassification promotes responsiveness to shareholder demands and pressures directors to perform to retain their seats. Declassified boards are more likely to be diverse and increase accountability and responsiveness to shareholders.
More than 90% of S&P 500 companies elect each director annually. Annual elections are widely viewed as a corporate governance best practice to make directors more accountable, contributing to improved performance and increased company value.
Shareholder resolutions by James McRitchie on this topic won 11 of 11 votes at companies since 2018, according to data compiled by Diligent, with an average vote of more than 77%. Proxy advisory firms ISS and Glass Lewis both supported all such proposals. According to one of our largest shareholders, BlackRock: “Directors should be re-elected annually; classification of the board generally limits shareholders’ rights to regularly evaluate a board’s performance and select directors.” Vanguard generally votes for proposals to declassify an existing board and votes against management or shareholder proposals to create a classified board.
According to Equilar, “A classified board creates concern among shareholders because poorly performing directors may benefit from an electoral reprieve. Moreover, a fraternal atmosphere may form from a staggered board that favors the interests of management above those of shareholders. Since directors in a declassified board are elected and evaluated each year, declassification promotes responsiveness to shareholder demands and pressures directors to perform to retain their seat.”
This proposal should also be evaluated in the context of our Company's overall corporate governance as of this submission: Shareholders cannot call special meetings, act by written consent, or modify various bylaws without at least 66 and 2/3% of the voting power of outstanding stock.
Our Company’s technology is second to none. Our Company’s corporate governance should meet the same high standards.
Increase Long-Term Shareholder Value
Vote FOR Elect Each Director Annually – Proposal [4*]