The 2006 General Meeting season saw an increase in the number of shareholder resolutions posted in American companies. Close to 400 resolutions regarding corporate governance (against 383 last year) and approximately 180 environmental and social resolutions (6.5% more than in 2005) were submitted to shareholder vote.
Corporate governance resolutions led a growing number of shareholders to stand against the plurality voting system. Such a system allows the election of a director with only one vote, which is fundamentally contrary to shareholder democracy. In this context, shareholder resolutions requesting majority voting (the prevailing system in Europe) got more than 50% support at 32 companies! Among other issues addressed, the annual election of directors also won support at 38 companies.
With regard to compensation, resolutions requested in particular the publication of a remuneration report, shareholder approval of executive severance pay and the integration of performance criteria in compensation plans. A majority of these resolutions received 30 to 40% support, twice the acceptance rate in previous years.
Environmental and social resolutions essentially addressed the following issues: climate change, the adoption of a human rights policy, control over toxic products, companies' political contributions, and the damage linked to drilling in Alaska. Among these resolutions, demands regarding human rights were approved by more than 25% of votes while those regarding political contributions were approved by more than a third of votes.
Although voting results in the USA are generally non-binding, a study conducted by the Council of Institutional Investors revealed that 63% of companies where a resolutions obtained a majority of votes in 2005 took concrete measures, against only 28% previously. According to the Head of Boards of Directors' Practice at Heidrick & Struggles, an executive search firm, "directors are starting to sit up and take notice". This positive evolution will certainly be confirmed in 2006 in light of shareholder resolutions' spectacular success.
