Allstate Corp. on Wednesday joined the growing ranks of companies making it easier for shareholder activists to make boards of directors squirm by toughening voting standards during annual meeting season.
The new policy of the Northbrook-based insurer will require that for any nominee, if the number of votes withheld exceeds that cast in favor of his or her election, the nominee must submit his or her resignation to the board, which will then weigh whether to accept or reject it. Previously, there were no consequences to having more votes withheld than cast in favor.
Allstate’s move came a day after Schaumburg-based Motorola Inc. changed its voting practices for electing directors, in a trend that has grown since Intel Corp. altered its corporate governance policies in January.
“Majority voting is here to stay and will be a dominant issue for the 2006 proxy season,” Claudia Allen, a partner in Chicago-based law firm Neal Gerber & Eisenberg LLP, said in a study report released Tuesday examining the trend of U.S. public companies to toughen voting standards.
The study suggests that many companies adopt majority vote policies or bylaws in response to stockholder proposals or litigation. The building trades unions have been a major force, submitting at least 66 of approximately 140 majority vote proposals for the 2006 proxy season, the study said, citing data supplied by Insitutional Shareholder Services. The number of proposals for 2006 is up from 89 in 2005 and 12 in 2004, the study said.
Allstate said its new policy “enhances its accountability to shareholders.”
But the nation’s second-biggest home and auto insurer left itself plenty of wiggle room if it really doesn’t want to give a director his walking papers.
In considering the resignation, the Allstate board’s nominating and governance committee will evaluate such factors as the director’s length of service, qualifications, contributions to the company and the reasons for the withheld vote.
Also Wednesday, a former worker in Florida sued the company, claiming it cheated clerical workers out of overtime pay, the same accusation Allstate settled in California last year for $120 million, Bloomberg News reported.
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