Delaware corporate law holds that a director remains on a board until his or her
successor is elected and qualified, or until he or she resigns or is removed from office. An incumbent director who
fails to receive the required vote for election continues to serve as a "holdover director." The Company's current
director resignation guideline requires incumbent directors to tender an irrevocable resignation conditioned on
the failure to be re-elected in an annual election. Board members then review a tendered resignation and decide
whether the unelected director will remain on the Board.
The proposed Governance Guideline sets a more demanding director resignation review process. The Guideline
provides for the Board's exercise of its business judgment to determine whether to accept or reject the initial
resignation of an incumbent director who fails to receive majority vote support, Importantly, the Guideline further
holds that if a "holdover director" fails to be re-elected at the next annual meeting of shareholders, a new
tendered resignation will be effective ninety days following the election vote certification. The Guideline honors
the shareholder vote as the final word when a "holdover director" is not re-elected.
Shareholder director election voting rights under Delaware corporate law are foundational rights in the
governance of corporations. The majority vote director election standard adopted by the Company gives
shareholders voting rights that have legal effect. It is important that corporate director resignation guidelines and
bylaws not undermine shareholder voting rights. The proposed Resignation Guideline strikes a proper balance
between board discretion and shareholder director election voting rights, establishing shareholder voting in
director elections as a more consequential governance right.