A Microsoft shareholder is proposing to move the company to a different method of electing board members, with the goal of giving smaller groups of shareholders more power to shake up the company’s board.
The proposal for “cumulative voting” would give each shareholder the option to cast multiple votes in favor of a specific board candidate, and withhold votes for others, boosting the chances of putting a dissident group’s representative on the board. The proposal was submitted to Microsoft by Kenneth Steiner, a private investor from Long Island who has campaigned for similar rules at many other public companies.
As a group, Microsoft shareholders routinely reject shareholder proposals, but this one has the potential, at least, to tap into periodic waves of dissatisfaction over Microsoft’s share price and CEO Steve Ballmer’s leadership.
“Under cumulative voting shareholders can withhold votes from poor-performing directors, in case there are any, in order to cast multiple votes for other director candidates,” reads the text of the proposal, made public this week in Microsoft’s annual proxy statement. “This is an important protection for shareholders.”
As explained by the proposal, “Cumulative voting means that each shareholder may cast as many votes as equal to the number of shares held, multiplied by the number of directors to be elected. A shareholder may cast all such cumulated votes for a single candidate or focus on a few candidates.”
Cumulative voting is a controversial idea in corporate governance, with some investors contending that the election of dissident board members can lead more to dysfunction than to healthy change.
In the filing, Microsoft’s board recommends a vote against the proposal.
“The Board of Directors believes the adoption of cumulative voting is not in the best interests of Microsoft and our shareholders as a whole,” reads the Microsoft board’s recommendation. “The primary use of cumulative voting is to allow minority blocs of investors to place their representatives on the Board of Directors. We believe each director’s election should involve a broader mandate, and to that end we have a majority voting standard in place.”
Voting on the proposal is set for Microsoft’s annual meeting, Nov. 28 in Bellevue.
