General Electric and Bank of America have both recently announced amendments to their by-laws that will allow a shareholder or group of shareholders holding 3% or more of a company’s shares for at least three years to nominate up to 20% of the board’s directors and include those nominees in the company’s proxy statement. This move should be welcomed by shareholders who will have the power to nominate allies for election to the board. By giving shareholders a say on who is nominated for election, shareholders have the ability to influence important issues of governance and corporate management that previously were out of reach.
Hopefully, shareholder nominees that are actually elected to the board will be appointed to board committees, including remuneration committees. Whether this will lead to any significant changes in remuneration policies and practices remains to be seen. However, shareholders now have the power to nominate directors who have well-established views on remuneration, among other issues.
GE and Bank of America should be applauded for this step towards greater shareholder engagement. More companies should be encouraged to follow suit. The next hurdle is for shareholders to actually use the voice they have been given in the boardroom by nominating directors who share their views.
(Note: For those interested, the Harvard Law School has an online forum that contains an excellent explanation proxy access and its pros and cons here).