This excerpt taken from the RYN DEF 14A filed Apr 9, 2007.
The North Carolina Business Corporation Act provides that unless otherwise specified in the Articles of Incorporation, directors are elected by a plurality of the votes cast. As our Amended and Restated Articles of Incorporation (our Articles of Incorporation) are silent on this issue, the plurality standard applies, and director nominees with the most votes cast in their favor are elected, regardless of the number of withheld votes.
Over the past few years, shareholders of many public companies have urged that in order to be elected directors should receive a majority of the votes cast in favor of their election, rather than the generally applicable plurality standard. In response, a number of public companies have adopted majority voting either through charter or bylaw amendments requiring a majority vote standard and/or bylaw or corporate governance policies requiring that a director not receiving a majority vote submit his or her resignation from the board. The resignation bylaw, policy or guideline is designed to deal with, among other things, state law holdover provisions such as those applicable in North Carolina that provide a director shall remain in office until his or her successor is elected, even if the director has not received a vote sufficient for re-election.
After discussion with certain shareholders, the Nominating Committee and the Board of Directors carefully deliberated the advantages and disadvantages of adopting a majority vote standard and concluded that the majority vote standard is in the best interest of our shareholders as it (i) ensures that only directors with broad acceptability among the voting shareholders will be seated on the Board and (ii) enhances the accountability of
each Board member to the shareholders. Having a majority voting standard would not have changed the outcome of any of our prior director elections because our director nominees have, in each election, received vote totals exceeding a majority of the votes cast.
The Board of Directors has adopted, and now recommends shareholder approval of, a proposal to amend our Articles of Incorporation to require that candidates in uncontested elections for director receive a majority of the votes cast in order to be elected. In contested elections where the number of nominees exceeds the number of directors to be elected, the vote standard would continue to be a plurality of votes cast.
Under North Carolina law, a standard other than a plurality may only be used if it is specified in the Articles of Incorporation. If the amendment is approved, a new Section (b) of Article V of our Articles of Incorporation will be added to read as follows:
(b) Except as shall be otherwise permitted or authorized by these Articles of Incorporation, each director shall be elected by a vote of the majority of the votes cast with respect to the director at any meeting for the election of directors at which a quorum is present; provided, that if the number of nominees exceeds the number of directors to be elected, the directors shall be elected by a vote of the plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors. For purposes of this Section, a majority of the votes cast means that the number of shares voted for a director must exceed the number of votes cast against that director.
Existing Sections (b) and (c) of Article V will be renamed Sections (c) and (d) respectively. If approved, this amendment will become effective upon the filing of Articles of Amendment to our Articles of Incorporation with the Secretary of State of North Carolina. We would make such a filing promptly after approval of the proposal at the Annual Meeting. The new standard would then be applicable to the election of directors at the 2008 Annual Meeting of Shareholders. In addition, if this amendment is approved (and the number of director nominees does not exceed the number of directors to be elected), the proxy card for the 2008 Annual Meeting would be modified such that shareholders would be able to vote for or against, or to abstain from voting with respect to each director. Currently, the proxy card allows shareholders to either vote for a director or to withhold voting for such director.
Under the holdover provisions of the North Carolina Business Corporation Act, a director continues to serve in office until his or her successor is elected or until there is a decrease in the number of directors, even if the director does not receive the required vote. To address the issue of holdover directors if the amendment to our Articles of Incorporation is adopted, the Board of Directors has approved a new provision of its Corporate Governance Principles. This provision will become effective upon filing of the Articles of Amendment described above, assuming shareholder approval of the amendment, and does not require any shareholder action.
The new Corporate Governance Principle will require that if an incumbent director is nominated but not re-elected (i.e., does not receive the required majority vote), the director shall tender his or her resignation to the Board of Directors. The Principle will require the Nominating Committee to recommend to the full Board of Directors whether or not to accept the resignation and will require the Board to act on the recommendation and publicly disclose its decision and rationale within 90 days after receipt of the tendered resignation. Any director who tenders his or her resignation pursuant to this provision would not participate in the Nominating Committee recommendation or Board action regarding whether to accept the resignation offer.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANYS AMENDED AND RESTATED ARTICLES OF INCORPORATION TO IMPLEMENT MAJORITY VOTING FOR DIRECTORS.