Risk & Governance Weekly

In Brief

Boston Properties Directors Get Majority Opposition, Investor Says

Four directors at Boston Properties received greater than 50 percent opposition, the United Brotherhood of Carpenters and Joiners told Risk & Governance Weekly.

Lawrence S. Bacow, Zoe Baird, and Alan J. Patricof failed to win majority support at company’s May 12 meeting, according to Ed Durkin, the Carpenters’ corporate affairs department director. A fourth director, Martin Turchin, had approximately 60 percent opposition, Durkin said. Though the company did not announce specific vote results at the meeting, Durkin told R&GW that a company representative gave him the estimated numbers.

The Boston-based real estate developer does not have a majority voting bylaw or a policy that asks directors to resign if they fail to obtain at least 50 percent support. Durkin said he told the board chairman, Mortimer B. Zuckerman, that the four directors should tender their resignations. “He clearly indicated that wouldn’t happen,” Durkin said.

Bacow, Baird, Patricof, and Turchin were the only directors up for re-election this year, as Boston Properties has a staggered board. Shareholders have been pressuring the company to declassify its board for several years. Declassification proposals have won over 70 percent support since 2004, with a 2007 resolution receiving 82.4 percent of votes cast in favor. A declassification measure, submitted by shareholder Evelyn Y. Davis, was on the ballot this year.

The Carpenters will not press for board resignations, Durkin said, but will continue to urge the company to adopt a majority vote standard and a director resignation policy.

The company did not respond to R&GW’s requests for comment. –L. Reed Walton

Icahn Launches Proxy Contest at Yahoo!

Billionaire investor Carl Icahn has launched a proxy contest at embattled Internet search firm Yahoo!, and is seeking to replace all 10 directors on the board, including CEO Jerry Yang.

Among Icahn's 10 nominees are former Viacom CEO Frank Biondi Jr., Harvard Law School Professor Lucian Bebchuk, and internet billionaire Mark Cuban, who owns the Dallas Mavericks basketball team. The proxy bid is aimed at pressuring the company to reach out to would-be bidder Microsoft to renew buyout efforts. Sunnyvale, Calif.-based Yahoo rejected a cash-and-stock offer of $44.6 billion by Microsoft in February. There were media reports that the offer would be raised to $47.5 billion, but Microsoft withdrew its bid early this month, according to a Yahoo press release.

Other Yahoo shareholders are disappointed with the board’s rejection of the Microsoft offer. Shareowner Eric Jackson of Ironfire Capital, whose grassroots Web campaign against board leadership at the company last year contributed to the resignation of CEO Terry Semel, has voiced disapproval of the board’s direction this year as well.

“I think it’s great that Yahoo shareholders will have a choice of 20 people to elect a board of 10,” Jackson told R&GW. Jackson said he intends to listen to all of the directors up for election--including the incumbents. “I want to know who has the best chance to get the highest price for [Yahoo’s] stock.  I've been severely disappointed in the existing board in the last four years,” Jackson said.

Icahn has been successful in his recent proxy bids. WCI Communities agreed to nominate three dissident candidates–including Icahn–to its board in August, according to regulatory filings. In his bid for a board seat at Motorola, Icahn won 46 percent shareholder support at the firm’s 2007 meeting. After promising to relaunch a proxy fight at the mobile handset maker this year, Motorola agreed to seat two of Icahn’s board nominees at its May 5 annual meeting. –L. Reed Walton

Mutual Fund Directors Join With Millstein Center in New Forum

Independent board chairs at U.S. mutual funds will have a new forum in which to discuss governance issues, regulation, and policy matters.

The Millstein Center for Corporate Governance and Performance at Yale University announced a new permanent body composed of independent board chairs and lead independent directors. The forum, called the Conference of Fund Leaders (CFL), will discuss and present findings on issues important to fund investors and directors and promote research into the impact of independent leadership at mutual funds, according to Yale’s Stephen Davis, writing for the Harvard Law School Corporate Governance Blog.

The CFL, which will hold its inaugural event in October in New York, will be jointly administered by the Millstein Center and by the Mutual Fund Directors Forum--the professional organization representing independent fund directors in the U.S.

It has been nearly three years since a federal appeals court struck down a regulation approved 3-2 by the Securities and Exchange Commission under former Chairman William Donaldson that required mutual funds to have an independent board chair and to retain 75 percent independent directors. Since then, Davis says, 65 percent of mutual funds have installed independent chairs despite the rule being invalidated. –L. Reed Walton

Georgia Approves Majority Voting Legislation

Georgia has enacted a new law that will allow companies incorporated in the state to more easily adopt a majority vote standard for board elections.

The measure, which was signed into law May 6 by Georgia Governor Sonny Perdue, allows boards to amend their bylaws to adopt majority voting in uncontested director elections. Previously, under Georgia state law, public companies could only adopt a standard other than plurality voting by amending their articles of incorporation.

The law was intended to protect shareholders by offering a way to elect only those directors who receive 50 percent support or more, the law’s main sponsor, Republican Bill Cowsert of the Georgia Senate, told R&GW. According to the law’s provisions, shareholders may still amend the bylaws or articles to provide for a majority vote, or repeal a board-approved majority vote measure.

Cowsert told R&GW that the measure received the unanimous backing of the governors of the Georgia State Bar Association. He said he could not speculate whether the new law would draw more governance-minded businesses to incorporate in the state.

One company that is pleased to see the law’s passage is Atlanta-based SunTrust bank, which lobbied for the law’s passage. “Now the law makes it possible to incorporate majority voting provisions in our bylaws,” David Wisniewski, SunTrust Group’s vice president and managing attorney, told R&GW. SunTrust adopted a director resignation policy in 2007; sections of the new law will also make it easier for companies to enforce resignation policies for directors who receive less than majority shareholder support. –L. Reed Walton