The ability to elect directors is the most important use of the shareholder franchise and all directors should be accountable on an annual basis. A staggered board can entrench management and effectively preclude most takeover bids or proxy contests. Although the board describes the company as being in a period of transition, there is no indication as to how long it expects this period to last, nor is there a “sunset” on the classified board structure. Moreover, this proposal explicitly contemplates a transition period before the board is fully declassified, as the “resolved clause” states that implementation of the proposal would not affect the unexpired terms of directors elected prior to its implementation. If shareholders approve this proposal, as well as a binding management proposal to amend the certificate of incorporation at next year’s annual meeting, the earliest point at which the board could be fully declassified would be the 2024 annual meeting, more than three years after the company’s reorganization was effected in January 2021. Therefore, support for this proposal to declassify the board is warranted.
Big win for shareholders here. This vote will be very close.
Should the board reconsider their recommended vote?