Majority voting update

By Cydney Posner

Corporate Counsel reports this morning that Pfizer, the originator of the "Pfizer model" of majority voting bylaw (which required any director who received a greater number of votes "withheld" from his or her election than votes "for" election to promptly tender his or her resignation), has now abandoned the Pfizer model and adopted a true majority voting standard in its bylaws (operative except in contested elections).  Under the new bylaws, directors who do not receive a greater number of votes cast "for" than cast "against" that director are not elected. While they may remain in place under Delaware holdover rules, Pfizer's corporate governance guidelines (see below), not the bylaws, mandate that they submit an irrevocable resignation. The Pfizer bylaws also provide that director nominees proposed by shareholders must deliver a statement that, if elected, they agree to tender an irrevocable resignation upon failure to receive the required vote in a subsequent election. The bylaw provides in part:

"The vote for directors shall be by ballot. Unless a greater number of affirmative votes is required by the Certificate of Incorporation, these by-laws, the rules or regulations of any stock exchange applicable to the Corporation, or as otherwise required by law or pursuant to any regulation applicable to the Corporation, if a quorum exists at any meeting of stockholders, stockholders shall have approved any matter, other than the election of directors, if the votes cast by stockholders present in person or represented by proxy at the meeting and entitled to vote on the matter in favor of such matter exceed the votes cast by such stockholders against such matter. A nominee for director shall be elected to the Board of Directors if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election; provided, however, that directors shall be elected by a plurality of the votes cast at any meeting of stockholders for which (i) the Secretary of the Corporation receives a notice that a stockholder has nominated a person for election to the Board of Directors in compliance with the advance notice requirements for stockholder nominees for director set forth in Article II, Section 13 of these By-laws and (ii) such nomination has not been withdrawn by such stockholder on or prior to the day next preceding the date the Corporation first mails its notice of meeting for such meeting to the stockholders. If directors are to be elected by a plurality of the votes cast, stockholders shall not be permitted to vote against a nominee."

As Pfizer is generally viewed to be a thought leader in matters of corporate governance (well, except for that little kerfuffle about its now-deposed CEO receiving exorbitant "pay for failure"), this move may well be a harbinger of things to come.

As noted above, while the Pfizer bylaws do not require resignations by directors nominated by the board, that concept is still captured in Pfizer's corporate governance guidelines:

7. Voting for Directors. In accordance with the Corporation’s By-laws, if none of our stockholders
provides the Corporation notice of an intention to nominate one or more candidates to compete with the
Board’s nominees in a Director election, or if our stockholders have withdrawn all such nominations by the day
before the Corporation mails its notice of meeting to our stockholders, a nominee must receive more votes cast
for than against his or her election or re-election in order to be elected or re-elected to the Board. The Board
expects a Director to tender his or her resignation if he or she fails to receive the required number of votes for reelection.

The Board shall nominate for election or re-election as Director only candidates who agree to tender,
promptly following such person’s failure to receive the required vote for election or re-election at the next
meeting at which such person would face election or re-election, an irrevocable resignation that will be effective
upon Board acceptance of such resignation. In addition, the Board shall fill Director vacancies and new
directorships only with candidates who agree to tender, promptly following their appointment to the Board, the
same form of resignation tendered by other Directors in accordance with this Corporate Governance Principle.
If an incumbent Director fails to receive the required vote for re-election, then, within 90 days following
certification of the shareholder vote, the Corporate Governance Committee will act to determine whether to
accept the Director’s resignation and will submit such recommendation for prompt consideration by the Board,
and the Board will act on the Committee’s recommendation. The Corporate Governance Committee and the
Board may consider any factors they deem relevant in deciding whether to accept a Director’s resignation.