Commentary by David F. Larcker, James Irvin Miller Professor of Accounting & Director, Stanford GSB Corporate Governance Research Program; and Brian Tayan, Stanford GSB Case Writer, MBA ’03.
In July 2009, a shareholder of Symantec sponsored a proxy proposal that would lower the threshold required for shareholders to call a special meeting, from 25 percent to 10 percent. The shareholder justified the proposal by stating that it would allow investors to correct certain perceived deficiencies in the company’s governance system. Among them:
- Directors are elected by plurality rather than majority voting.
- Chairman John Thompson serves on two outside boards, creating a potential over-extension problem.
-Three outside directors serve on boards rated “D” by The Corporate Library.
-The lead independent director is designated a “Problem Director” by The Corporate Library.
The company opposed the proposal, stating that a 25 percent threshold was sufficient. It also claimed to have several “good governance” features, including separation of the chairman and CEO roles, no poison pills, a declassified board, 8 of 10 independent directors, and simple majority votes to approve bylaw or charter amendments. Still, the proxy proposal was approved by shareholders, with 339 million votes in favor and 280 million against, and thereby enacted.