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JCP » Topics » PROPOSAL 4 - STOCKHOLDER PROPOSAL RELATING TO ADOPTION OF A MAJORITY VOTE STANDARD FOR THE ELECTION OF DIRECTORSThis excerpt taken from the JCP DEF 14A filed Apr 4, 2007. PROPOSAL 4 —
STOCKHOLDER PROPOSAL RELATING TO ADOPTION OF A MAJORITY VOTE STANDARD FOR THE ELECTION OF DIRECTORS
JCPenney has been informed that the Sheet Metal Workers’
National Pension Fund, 601 N. Fairfax Street,
Suite 500, Alexandria, Virginia 22314, an owner of
7,050 shares of common stock, intends to submit a
resolution at the Annual Meeting as follows:
“Resolved: That the shareholders of
JC Penney (“Company”) hereby request that the
Board of Directors initiate the appropriate process to amend the
Company’s governance documents (certificate of
incorporation or bylaws) to provide that director nominees shall
be elected by the affirmative vote of the majority of votes cast
at an annual meeting of shareholders, with a plurality vote
standard retained for contested director elections, that is,
when the number of director nominees exceeds the number of board
seats.
Supporting Statement: In order to provide
shareholders a meaningful role in director elections, our
company’s director election vote standard should be changed
to a majority vote standard. A majority vote standard would
require that a nominee receive a majority of the votes cast in
order to be elected. The standard is particularly well-suited
for the vast majority of director elections in which only board
nominated candidates are on the ballot. We believe that a
majority vote standard in board elections would establish a
challenging vote standard for board nominees and improve the
performance of individual directors and entire boards. Our
Company presently uses a plurality vote standard in all director
elections. Under the plurality vote standard, a
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nominee for the board can be elected with as little as a single
affirmative vote, even if a substantial majority of the votes
cast are “withheld” from the nominee.
In response to strong shareholder support for a majority vote
standard in director elections, an increasing number of
companies, including Intel, Dell, Motorola, Texas Instruments,
Safeway, Home Depot, Gannett, and Supervalu, have adopted a
majority vote standard in company by-laws. Additionally, these
companies have adopted director resignation policies in their
bylaws or corporate governance policies to address post-election
issues related to the status of director nominees that fail to
win election. Other companies have responded only partially to
the call for change by simply adopting post-election director
resignation policies that set procedures for addressing the
status of director nominees that receive more
“withhold” votes than “for” votes. At the
time of the submission of this proposal, our Company and its
board had not taken either action.
We believe the critical first step in establishing a meaningful
majority vote policy is the adoption of a majority vote standard
in Company governance documents. Our Company needs to join the
growing list of companies that have taken this action. With a
majority vote standard in place, the board can then consider
action on developing post election procedures to address the
status of directors that fail to win election. A combination of
a majority vote standard and a post-election director
resignation policy would establish a meaningful right for
shareholders to elect directors, while reserving for the board
an important post-election role in determining the continued
status of an unelected director. We feel that this combination
of the majority vote standard with a post-election policy
represents a true majority vote standard.”
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