From ISS Governance Weeky, April 6, 2007:
Ohio lawmakers have introduced legislation that would make it possible for Ohio-incorporated firms to adopt majority voting in director elections.
Ohio law now mandates that companies use plurality voting. The legislation (H.B. 134), introduced on March 27, would allow issuers to adopt alternative election standards in their articles of incorporation after Jan. 1, 2008.
The legislation was prompted by requests by trade union pension funds and several prominent Ohio companies to change the law to allow firms to change their board election standards. The United Brotherhood of Carpenters and Joiners and the Sheet Metal Workers have sought to build support for the legislation by filing proposals at 13 Ohio-incorporated firms this season that urge the companies to reincorporate in Delaware, which permits majority voting. The two union funds have withdrawn most of those proposals after the companies agreed to support legislation to change Ohio law.
A Carpenters proposal will appear on the ballot at Convergys, an Ohio-based consulting firm, on April 17. Convergys asked the Securities and Exchange Commission for permission to exclude this proposal, but the SEC staff rejected that request in late December. A similar reincorporation proposal is slated for a vote at DPL on April 27.
Convergys opposes the proposal, arguing in its proxy that the benefits of remaining in Ohio would outweigh any benefits from incorporating in Delaware. The company notes that reincorporation would have to be approved by investors and dissenting shareholders would be entitled to “appraisal rights,” which could require the company to repurchase their shares. The company also said it would have to obtain the consent of some lenders. Reincorporation may also subject the firm to Delaware's franchise tax and additional shareholder lawsuits, Convergys warned.
A growing number of large companies have adopted majority vote bylaws after significant shareholder support for the issue during the 2006 and 2005 proxy seasons. Overall, at least 28 percent of the S&P 500 firms have adopted such bylaws, according to the Chicago law firm of Neal, Gerber & Eisenberg. At least 60 majority-voting proposals are slated to appear on corporate ballots this season, according to ISS data.