Resolved clauseShareholders ask the Board to take the steps necessary to amend the Company’s governing documents to provide that in uncontested elections, directors shall be elected by the affirmative vote of the majority of votes cast at a meeting of shareowners, i.e., if the votes cast “for” a nominee exceed the votes cast “against” (or “withheld”) from the nominee.
Supporting statementDEAR FELLOW SHAREHOLDERS: El Pollo Loco has a plurality vote standard for director elections. Under this system, directors can be elected with just one affirmative vote, making it impossible to defeat directors who run unopposed and thus depriving shareowners of a critical accountability tool. As one New York Times article said, plurality voting schemes are part of a Board “electoral system unworthy of Soviet-era sham democracies.” By contrast, with a majority voting standard, since nominees must receive support from a majority of shares voted to be elected, shareholders can reject directors they believe won’t act in their best interests. Since incumbents serving in this system know shareowners can determine whether they are elected to serve additional terms, majority voting standards incentivize higher levels of director performance and heighten their accountability through the threat of a loss of majority support. Indeed, majority voting standards are widely accepted to be a matter of good corporate governance. Take the Commonsense Principles of Corporate Governance, for example. Endorsed by Warren Buffett, Larry Fink, Jamie Dimon, Ronald O’Hanley, Brian Moynihan, and many others, the Principles say that in uncontested elections, “directors should be elected by a majority of the votes cast.”1 This view is widely embraced: (1) the Council of Institutional Investors’ Policies on Corporate Governance state the same, (2) Institutional Shareholder Services (ISS) supports majority voting, (3) so does Glass Lewis—which believes “that a majority vote standard will likely lead to more attentive directors,” and (4) major asset managers like Vanguard Group, BlackRock, State Street, UBS, Fidelity, and Morgan Stanley also all generally support proposals to adopt majority voting standards. In fact, many companies tout their majority voting standards in their proxy statements. Prominent examples include Amazon, BNY Mellon, Boeing, Chevron, Coca-Cola, Conagra, Darden, Dow, FedEx, General Mills, Goldman Sachs, IBM, Jack in the Box, Johnson & Johnson, Kimberly-Clark, Korn Ferry, Kroger, McDonald’s, McKesson, NVIDIA, Procter & Gamble, PVH, and Walmart. In short, majority vote standards help ensure that directors who aren’t broadly supported by shareholders aren’t elected to serve as their representatives and we believe support for such a standard is clearly warranted. Thank you. 1Current or former Chairs of Berkshire Hathaway, BlackRock, Vanguard Group, JP Morgan Chase, State Street, and Bank of America, respectively