The Council of Institutional Investors called on NYSE Euronext and Nasdaq OMX to force companies to remove so-called zombie directors, or those who fail to receive a majority of votes in uncontested elections but remain in their seats, according a CII statement Friday.
The CII urged the stock markets to propose rules to require companies that list equity securities on the New York Stock Exchange and Nasdaq stock market to adopt a majority voting standard to elect directors, with a requirement that incumbent directors who do not receive a majority of votes promptly resign from the board and not be reappointed.
“While most of the largest U.S. companies do elect directors by majority vote, thousands of public companies still cling to plurality voting, which makes for rubber-stamp elections,” the CII said in a statement about its petitions.
Even among the “minority of listed companies that have adopted a majority voting standard … 'only half of directors' ultimately step down from the board after failing to obtain a majority of the 'for' votes,” Jeff Mahoney, CII general counsel, wrote in separate six-page letters sent Thursday to, respectively, John Casey, vice president-legal, NYSE Regulation Inc., a unit of NYSE Euronext, and Edward Knight, executive vice president and general counsel Nasdaq OMX.
The only response CII has received so far was from Mr. Knight, saying only his thanks for the letter, Mr. Mahoney said in an interview.
In the letters, Mr. Mahoney said CII officials “would welcome the opportunity to meet” with Messrs. Casey and Knight or their colleagues to discuss the petition.
The SEC would have to approve the rules after putting them out for public comment, Mr. Mahoney said in the interview.
NYSE officials declined to comment through Rich Adamonis, spokesman. Christine Barna, Nasdaq spokeswoman, couldn't be reached for comment.
Florence E. Harmon, SEC spokeswomen, said officials declined to comment.