Microsoft shareholders might see a few fresh faces on the ballot when it’s time to vote on the company’s board of directors next year.
The company stepped out ahead of a growing trend in corporate governance on Friday, announcing proxy access rules that may give large shareholders a chance to have the names of their board nominees show up in the company’s official filings each year.
Activist shareholders have been asking Microsoft — and other industry giants — for this kind of policy for years.
The goal is to make annual board elections less one-sided. At most companies right now, voting shareholders are only presented with candidates that were handpicked by company insiders. Activist groups say that doesn’t give shareholders enough say over board appointments.
Under Microsoft’s new rules, at least two of the nominees presented to voting shareholders at the company’s annual meeting may now come from the shareholders themselves. Only those who own at least a 3 percent stake in the company, which would be worth about $11 billion right now, for three years are eligible to submit names.
A shareholder proposed a similar plan at Microsoft’s most recent shareholders meeting in December, but the company lobbied against the policy because it said, among other concerns, it made it possible for too many names to make it on the proxy statement. Microsoft argued that could cause too much turnover in one year, leading to instability on the board.
The proposal died with just over 10 percent in favor.
The trend has been picking up steam ever since. Many companies have considered proposals but few have acted. Apple’s activist shareholders did a little better than Microsoft’s at their annual meeting in March, but they failed to get the rules on the books with just 39 percent in favor.
A Microsoft shareholder planned to bring the fight up again this year with another proxy access rule, but the company headed it off with the policy announced today.
“Our goal is to be both thoughtful and proactive in pursuing good governance,” deputy general counsel John Seethoff wrote in a blog post announcing the news. “We believe this proxy access framework strikes the right balance for Microsoft by ensuring that Board nominees are supported by long-term shareholders representing a significant, but attainable, proportion of outstanding shares.”
