By Ted Mann And Joann S. Lublin
General Electric Co. opened the door for its investors to get a
seat on the company's board of directors.
GE said Wednesday it would begin allowing groups of shareholders
to put forth nominees to the company's board, provided the
candidates' backers own at least 3% of GE shares for at least three
years.
The move makes the industrial conglomerate one of the few
companies to adopt so-called proxy access. Hewlett-Packard Co.
adopted such a measure in 2013, and Verizon Communications Inc. did
so last year, but they remain rare. In 2014 annual corporate
meetings, only 17 similar measures were voted on, and of those,
just six received a majority of the vote, according to
Institutional Shareholder Services, the biggest U.S. proxy-advisory
firm.
"In talking with many of our shareowners and as part of our
annual governance review, we decided that implementing proxy access
was appropriate at this time," GE spokesman Seth Martin said in an
email message.
GE investors and retirees have been frustrated with the
company's stagnant stock price, which has been stuck below $30
since the financial crisis. Chairman and Chief Executive Jeffrey
Immelt is working to increase the company's industrial revenue
while reducing its reliance on earnings from its finance arm that
investors value less.
GE shares rose 5 cents Wednesday to $24.77, but are down 2% so
far this year.
Unlike other companies, GE hasn't been publicly targeted by
institutional investors who have made such proxy-access measures a
goal of corporate-governance changes. GE also hadn't previously put
the issue to a vote of shareholders, as other companies have.
GE shareholder Kevin Mahar, who is affiliated with a GE union,
submitted such a proposal for the 2015 proxy last year, according
to public records. Lawyers representing GE attempted to exclude
that proposal, but the Securities and Exchange Commission denied
GE's request.
The only GE shareholders currently holding 3% of GE's shares
outstanding are large institutional investors: Vanguard Group,
State Street Global Advisors and BlackRock Inc., according to
FactSet.
GE's board last week took the unusual step of embracing proxy
access without submitting it for shareholder approval.
More than three years ago, a federal court shot down an effort
by the SEC to impose proxy access on U.S. firms, leaving
shareholders to push the issue company by company. The
court-scuttled SEC rule would have allowed an investor or group of
investors owning at least 3% of a company's stock for at least
three years to win the right to nominate.
Among GE's board members is Mary Schapiro, who led the SEC at
the time it issued proxy-access rules.
Similar proposals have gained wider investor support recently.
The 17 such measures that reached a vote during annual meetings
last year were approved by 33.9% of shares cast, according to
ISS.
By contrast, the 13 proxy-access proposals voted on during 2013
garnered an average of 32.5% support--with three getting majority
endorsement, ISS added. Shareholders have submitted 93 such
resolutions for 2015 annual meetings, according to ISS.
New York City Comptroller Scott Stringer last fall began an
initiative to ease the ability of shareholders to nominate
directors at 75 companies.
At least eight U.S. companies voluntarily adopted some form of
proxy access in recent years, said Michael Garland, an assistant
comptroller responsible for corporate governance for New York City.
Among those doing so was CF Industries Holdings Inc., which
disclosed its board's bylaw adoption in a regulatory filing
Tuesday.
Write to Ted Mann at ted.mann@wsj.com and Joann S. Lublin at
joann.lublin@wsj.com
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