Last year, after being voted out of office by the shareholders who technically pay their salaries, 55 directors at publicly-traded American companies did something rather unusual: they refused to step down. In each of those 55 cases, the directors were protected by fellow board members and allowed to remain atop their corporate perches.
Scott Zdrazil said that’s an outrage and he's fighting to make such situations a thing of the past.
“Elections to the corporate boardroom in the United States are more predetermined than elections in North Korea,” Zdrazil, director of corporate governance for Amalgamated Bank, said.
Zdrazil, who represents the interests of investors in Amalgamated’s LongView Funds, has a history of fighting companies to force boardroom changes. Last year, his fund backed a successful proposal to shareholders of WellCare Health Plans, asking the company to detail its political contributions. “The proposal was opposed by WellCare's board, but received majority support from shareholders who cast a vote at the firm’s annual meeting, falling just short of legally passing.
Wellcare recognized the vote, “continued discussions on the subject and determined to begin publishing an annual political contributions report,” a spokesperson for the company said.
Zdrazil said he and other activist shareholders now are making a push toward a new goal: making sure companies fire directors who get voted out by shareholders. Many companies don't recognize votes against directors. Some directors, running unopposed for their seats, officially need only one shareholder to vote for them in order to be elected to the board, Zdrazil explained.
A notable case is that of New York-based Cablevision Systems, where three directors received less than majority support from shareholders in 2010 and 2012, yet remain on the board.
“A lot of the work is behind the scenes,” Zdrazil said “We’ve been encouraging more companies to adopt majority vote standards and we’re pleased to see most large companies have done so. But on the downside, smaller companies are waiting to receive proxy proposals, rather than acting proactively.”
According to Zdrazil, several public employee retirement funds have also been working on the issue.
“It goes to the root of your rights as a shareholder, and whether or not your vote carries any weight,” Zdrazil said.
This article was update with a statement from WellCare.