Increasing Access for Shareholder Director Nominees

Celia Taylor writes:

A recent Wall Street Journal article describes the increased access “activist investors” are gaining to many corporate boards. (WSJ, Monday April 7, 2008, p. C1). Fewer companies are willing to engage in a proxy battle over proposed shareholder nominees, with only 32% of doing so in 2007 while 61% did so in 2001. Carl Ichan just succeeded in his efforts to gain access to Motorola’s board, with the company announcing that Keith Meister, a managing director of the Icahn investment funds and principal executive officer of Icahn Enterprises would be "appointed to serve on the [firm's board of directors]," and William R. Hambrecht, founder, chairman and CEO of WR Hambrecht + Co. and co-founder of Hambrecht & Quist, would be "nominated for election" during the 2008 annual shareholders meeting.

Many factors may help explain why companies are less willing to engage in protracted proxy battles over shareholder nominee access including the general distrust of (and distaste for) current management, changes in corporate governance regimes and, arguably, the enhanced credentials of the proposed nominees. Arguable, because as the nominees to the Motorola board show, at present, shareholder nominees tend to replicate current management in terms of diversity. We don’t yet know how effective shareholder nominated directors may prove. We should start to consider whether the increased willingness of companies to allow access through this channel could be used to address serious diversity issues on boards.