Shareholder votes opposing directors rise sharply.

• Author: Heffes, Ellen M.
• Position: GOVERNANCE - PROXY Governance Inc.

During the 2009 proxy season, analysis by PROXY Governance Inc. shows a significant increase in the percentage of director nominees who received high percentages of shareholder votes cast in opposition in director elections.

Although the vast majority of director nominees continue to be elected with little opposition, for companies with director election results available through August 2009, 9.8 percent of unopposed director nominees had at least 20 percent of shares voted against them or withheld; this is up from 5.5 percent in 2008.

This trend was apparent at other threshold levels as well, with the percentage of directors having at least 40 percent of shares voted in opposition, doubling from 1 percent in 2008 to 2.1 percent in 2009. In addition, the percentage of directors failing to attain majority support tripled, from .2 percent in 2008 to .6 percent in 2009.

While declines in stock prices and the financial crisis no doubt played a role in the apparent increase in 2009 shareholder discontent, compensation and corporate governance concerns also appear to have been primary drivers behind the increasing number of shares voted in opposition to directors.

Of all director nominees who had more than 20 percent of shares withheld or voted against them in board elections, more than 57 percent served on compensation committees.

Among other findings;

* Despite fewer organized "Vote No" campaigns against directors this year, at least 84 directors at 48 companies failed to attain majority support from shareholders through August at more than 2,400 companies where...