Shareholder proposal aims to shake up Microsoft board

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.

  • guest

    “The Board of Directors believes the adoption of cumulative voting is not in the best interests of Microsoft and our shareholders as a whole,”

    This from the same group that has watched $350 billion in shareholder value be destroyed and MS’s dominance and relevance along with it.

    And Todd, did you notice the board killed the financial analysts meeting? Convenient, no? Particularly with Google recently passing MS in valuation and numerous concerns about existential threats to the company’s future? I guess it was easier to dispatch the critics rather than address the business problems.

  • guest

    Interesting concept. The current status quo clearly favors the existing board and particularly Gates and Ballmer. This new one would potentially reduce the latter’s influence considerably, making everyone on the board more vulnerable to being voted out, including them. Not surprising then that the company opposes it. But it would certainly make things more exciting, and it’s difficult to credibly argue MS’s board isn’t in need of a massive shakeup. Expecting the current slate to rein in Ballmer is like expecting Dina Lohan to rein in Lindsay.

  • Guest

    Admirable for trying, but this has as much chance of success as a protest movement in North Korea.

    Microsoft will go in the business history books as one of the biggest examples of “founder’s syndrome” undermining sound corporate governance in public companies.

    No wonder the stock is flat. On top of everything else, there is no real focus on shareholder value. What other publicly traded company would stay the course with this record? Carly Fiorina was dumped for losing less value and after a shorter time as CEO. The company exists to keep the leadership in place and rich and no one else.

    Time was people said “I wish I bought MSFT at X”. Now we say “I wish I’d sold MSFT at Y”.

  • guest

    Some shocking statistics from a few minutes research on Google finance: MS has failed to beat even the S&P in nine of the last thirteen years, including this one so far. An astounding 69% failure rate. Compare that with Apple, for example, that has failed to do it in only three of those years. A 77% success rate. Cumulatively, MS has lost almost half its value since 2000, while Apple is +2500%. Even if you take Apple out of the equation completely, what shareholder could be satisfied with that embarassing record? What CEO besides Ballmer could have survived it? What board?

  • paul

    About half a decade too late to do any good. Now the death spiral is not only unavoidable, it has already begun.