Skip to content

Bo Becker & Guhan Subramanian, Improving Director Elections, 3 Harv. Bus. L. Rev. 1 (2013).


Abstract: It is well known that U.S. director elections are largely a formality: incumbents typically nominate themselves, for elections that are almost always uncontested, and are re-elected with virtual certainty. The result, as illustrated by the recent debacle at J.P. Morgan Chase, is what one might expect: directors who are elected not for their qualifications but rather because shareholders simply have no other choice. In the aftermath of the 2008/2009 financial crisis, efforts were made to improve corporate democracy. The introduction of majority voting, the introduction of eProxy rules, and elimination of broker voting of uninstructed shares were predicted to dramatically improve the vibrancy of the director election process. Our analysis, based primarily on data from the 2007–2011 proxy seasons, indicates that these reforms have been ineffective in achieving their stated goals. Specifically, we find that: (1) only two incumbent directors who did not receive a majority of the votes cast have actually left their boards; (2) not a single insurgent candidate has made use of eProxy; and (3) only one director election outcome has changed due to the elimination of broker voting of uninstructed shares. We also find no evidence that these reforms have influenced the “shadow” negotiation between the board and major shareholders in favor of shareholders. In contrast to these reforms, our research suggests that a properly designed proxy access regime has the potential to meaningfully improve the director election process at U.S. corporations.