Referring to the majority-vote issue, Ms. Allen said, "I think it's had unexpected traction.
"I think it has a visceral appeal. People understand a withheld vote is meaningless. In an uncontested election, no one has to show up (to vote)." Until about a year ago — when the carpenters fund and a few other institutional shareholder activists began the campaign for majority vote — plurality vote was the standard at all but about four U.S. companies.
"A withhold vote has been symbolic," Ms. Allen said. "But a majority vote has consequences. A symbolic vote now can become fairly dangerous for companies" with a majority standard, leading to the unseating of a director, she said.
When the Securities and Exchange Commission failed to act on a proposal for shareholder access to the corporate ballot to nominate directors, "I think a lot of people began looking for another way to bring more accountability to the boardroom," Mr. McGurn said. Elections for directors are usually uncontested; many shareholders believe that because directors serve as their representatives, they should at least be elected by a majority of votes.
Mr. McGurn added, "Under the plurality standard you run unopposed, and if you get a single vote you are elected." To investors, it means "your vote doesn't count."
Although some companies have adopted a form of majority vote, Ms. Allen and Mr. McGurn said, they often leave more discretion to the board on seating directors than shareholder activists want.
Neal Gerber Eisenberg found that 69 of the companies they surveyed adopted majority-vote policies, 14 adopted corporate bylaws and four adopted both.
Ms. Allen said bylaws are typically tougher than policies. "There is a question of enforceability of these polices," Ms. Allen said. "How do you force a person to resign?"
The modified plurality standard still gives the board discretion on seating directors who fall short of a majority, she said.
Some 45 of the companies that adopted majority-vote provisions have what Mr. McGurn calls "plurality-plus" policies, where a majority withhold vote triggers an offer of resignation.
At its March 15 annual meeting, Hewlett-Packard Co., Palo Alto, Calif., will have a major test of support for the majority-vote proposal. The proposal, sponsored by the carpenters fund, would amend HP's bylaws to require a majority vote for election of directors.
ISS recommended its clients vote in favor of the carpenters fund proposal. HP asked shareholders to vote against the proposal, noting it had already adopted a majority-vote provision last November, although it still keeps its plurality-vote standard, a modification ISS classes as a plurality-plus policy.