3.4.10 Term of office

Directors are elected and re-elected by the shareholders at their annual meeting.1 The majority of listed corporations now hold annual re-elections. However, a large number still have staggered boards. Of the Fortune 500 companies 25.2% have staggered boards and of all 1411 NYSE companies 41.8% have staggered boards.2 In staggered boards, the directors are re-elected every three years, and one third are up for re-election every year, which system can be used as a defence against unfriendly takeovers. The protective system of "plurality voting", which means that directors can easily be reappointed with only a minority of shareholders voting in favour and the large majority abstaining, is now giving way to the more democratie system of majority voting.3 Other aspects of the procedure for voting on the reappointment of board nominees or for putting forward and voting on shareholder nominees are (1) separate notice and record dates for shareholder meetings to eliminate the "empty voting phenomenon", (2) proxy access reform to help shareholders gain free access to the proxy solicitation ballot as described above in connection with the Dodd-Frank Act and (3) electronic delivery of proxy materials.4

Proxy access on the company proxy ballot will, in practice, give shareholders many further rights. This system may become applicable for the 2011 proxy season, if it is not blocked by the pending litigation against it.5