The adoption of majority voting policies for directors increased among small-cap US companies this year amid pressure from major investors, according to a report by the California State Teachers’ Retirement System (CalSTRS).
A CalSTRS campaign that focused on 100 companies per year with a market capitalization of $2 bn or less consistently helped persuade companies to adopt standards that require directors to receive majority shareholder support for election over the last four year, says CalSTRS’ annual report on corporate governance.
This year, 53 targeted companies adopted a majority voting standard after the fund filed a shareholder proposal, while 33 adopted it without a proposal being filed, CalSTRS says. Last year, 42 targeted companies adopted the standard after a proposal was filed and 24 adopted it without one.
Since the start of the campaign, companies have become more willing to rethink their policies without the need for a proposal: in 2011, the first year of the campaign when 26 companies were targeted, 21 companies changed their approach following a proposal but none adopted the standard without one.
The fund says it focused on small-cap companies because only one in three companies in the Russell 2000 index has a majority voting standard.
CalSTRS, in cooperation with the California Public Employees’ Retirement System (CalPERS), also conducted a board diversity campaign in 2014, encouraging boards without women to include female directors. CalSTRS says it sent letters to 131 California-based portfolio companies with no women on their boards. At least 15 companies then included a woman on the board, while a total of 35 companies responded.
‘The strength and impact of our program is visible throughout the report,’ comments Anne Sheehan, CalSTRS’ director of corporate governance, in a statement. ‘The movement in the adoption of a majority voting standard and the gains made in our efforts on board diversity speak to the tenacity of our staff and the effectiveness of engagement in establishing good governance.’
