It seems that the blog post from earlier this week prompted some spirited discussion, or at least as spirited it gets around wonky corp gov subjects:

1. @Lawndale1: Key 2-3 #corpgov reforms that shareholders want/need; rest r frosting
   

2. @nminow: Disagree -- majority vote disclosure of political expenditures are the most impt.
   

3. @Lawndale1: would one of the other reforms address this real problem while fixing this would not address the others.
   

4. @nminow: Shareholders have to be able to remove directors.  Then directors would resolve the other issues correctly.
   

5. @Lawndale1: Exactly - Shareholders need to be able to remove directors.
   

6. @InfoCII: Disagree again! Majority voting for directors is key!
   

7. @Lawndale1: Majority voting falls too short of need for true shareholder access
   

8. @nminow: @InfoCII has it exactly right, as usual -- majority vote is the only meaningful avenue.
   

9. @CorpGov: Granted, it is key, but it still does not grant shareowners access
   

Tweets from:

1. @Lawndale1 - Andy Shapiro, PM of activist Lawndale Capital
   

2. @nminow - Nell Minow, corp gov luminary and ISS founder
   

3. @InfoCII - Twitter feed for the Council of Institutional Investors
   

4. @CorpGov - Jim McRitchie, noted corp gov advisor.
   

If you missed it, the blog post contends that the only corp gov reforms that should matter to investors are removing poison pills, declassifying BoD terms, and (maybe) proxy access.

Clearly, some observers put majority voting ahead of removing poison pills and declassifying BoDs. This makes little sense, based on the results we’ve seen of the entire majority vote enterprise, and on the subsequent share price performance.

Few Directors Affected

The campaign to implement majority voting has definitely succeeded. When we last looked at the subject in 2012, 80% of the S&P 500 had implemented it in some form, with decent progress since then.

Yet, we can count on one hand the number of directors that have resigned because they did not receive a majority of shareholder votes. In 2012 and 2013, fifteen directors at companies with majority vote bylaw terms received less than a majority of the shareholder vote. Four of these directors resigned and no longer serve on these company’s BoDs. By comparison, at all US companies in those two years, thousands of directors stood for election, with over a hundred receiving less than a majority of shareholder votes.

No Alpha, Either

Perhaps companies that implemented majority voting delivered superior returns anyway? Maybe removing this entrenchment mechanism make companies more sensitive to investor concerns, and drove performance?

Would that it were. We found no definitive research that shows that companies that implement majority voting outperform their benchmarks. In fact, we found only three analyses (one published) of the subject in the past seven years:

1. ❖Majority Voting for the Election of Directors (published law review paper, 2007) found no connection between majority voting and superior returns.
   

2. ❖A Paper Tiger? An Empirical Analysis of Majority Voting (working paper, December 2012) also found no connection between majority voting and superior returns.
   

3. ❖Does the Director Election System Matter? Evidence from Majority Voting (working paper, May 2013) used a novel analytical method to discern a small connection.
   

Notably, one of the definitive studies of the impact of corp gov on returns, What Matters in Corporate Governance? (Bebchuk, Cohen, and Ferrell), the paper that distills a long list of 24 corp gov reforms to the six most important one, does not include majority voting among the six.

Why Majority Voting?

We can’t figure it out. Do shareholders accept this relatively weak corp gov reform because they can accomplish something? The 2007 law review paper is worth excerpting:

1. Majority voting, as implemented in practice, simply does not give shareholders veto power over directors. ... This bottom line likely explains why so many companies have adopted some form of majority voting over a relatively short period of time. With no shareholder veto power, there is no risk of failed elections and therefore the objections raised by critics of majority voting ... are not really implicated. Thus, the decision to implement [majority voting] requires minimal thought by a board of directors. By implementing it, the board gives up little, if any, control over the election of directors but can then put out a press release touting the implementation as the latest example of its “‘long-standing commitment to responding to the concerns of [its] shareholders,’” and/or pacify activist shareholders. As a bonus, the media may even pick up the story, as it has on a number of occasions, and trumpet the company’s commitment to corporate governance.
   

Maybe majority voting is the best we can do, or the best we think we can do.

Sure, it annoys shareholders that incompetent entrenched directors can win elections with a single vote. And, let us say right here we don’t objectively oppose majority voting in principle. But acting on that frustration distracts from much more important goals.