Microsoft will let shareholders nominate board members

Bylaw change means anyone with a 3 percent stake in the company can push their own leadership candidates

A building on Microsoft's Redmond, Washington campus

A building on Microsoft's Redmond, Washington campus

Microsoft added a provision to its bylaws Friday that allowed shareholders with a significant stake in the company to directly nominate up to two candidates to its board of directors.

With the change, Microsoft will allow consortiums of up to 20 shareholders, who have owned a combined 3 percent stake in Microsoft for the past three years, to put forward nominations for up to 2 candidates or 20 percent of the board, whichever is larger. Functionally, that means a very small number of people and institutional investors have the power to nominate board members through the process.

Microsoft's bylaw change doesn't seem to have been the result of any significant behind-the-scenes intrigue. Several large companies have adopted "proxy access" proposals that allow this sort of direct nomination from shareholders over the past few years including Verizon, Western Union and Bank of America. Microsoft's terms are also largely in line with other proposals adopted by those corporations.

The change comes after investor Myra Young submitted a shareholder proposal last year that would have allowed groups of shareholders to nominate candidates for 4 of the board's 10 seats. At the time, the company opposed it and said it was "fundamentally flawed and not in the best interest of shareholders," and the proposal was voted down.

Even with the new proxy access provisions in place, it's unlikely that Microsoft will see major shake-ups in its board. Because the rules restrict nomination to coalitions of 20 investors, only those entities that already have a large stake in Microsoft will be able to use the system to make waves. Candidates submitted for voting will still need to win election by a majority of shareholders.

In addition, candidates nominated through this process who withdraw from consideration, become ineligible for election or don't receive more than 25 percent of votes in favor of their candidacy will be prevented from running again for two years. That means activist investors who want to take advantage of the system will need to get support from major shareholders in order to continue pushing director candidates.

The change comes as Microsoft faces ongoing pressure from Wall Street. In 2013, the company agreed to name ValueAct Capital President Mason Morfit to its board as part of an agreement to avoid a proxy fight with the activist investment firm. Microsoft also likely hasn't heard the last of Myra Young. Her husband James McRitchie, who has co-submitted a number of other shareholder proposals with her, said in an email that the two of them plan to file additional proxy access-related proposals to expand the power given to Microsoft shareholders.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags Microsoftbusiness issuesSEC Filings

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Blair Hanley Frank

IDG News Service
Show Comments

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Jack Jeffries

MSI GS75

As the Maserati or BMW of laptops, it would fit perfectly in the hands of a professional needing firepower under the hood, sophistication and class on the surface, and gaming prowess (sports mode if you will) in between.

Taylor Carr

MSI PS63

The MSI PS63 is an amazing laptop and I would definitely consider buying one in the future.

Christopher Low

Brother RJ-4230B

This small mobile printer is exactly what I need for invoicing and other jobs such as sending fellow tradesman details or step-by-step instructions that I can easily print off from my phone or the Web.

Aysha Strobbe

Microsoft Office 365/HP Spectre x360

Microsoft Office continues to make a student’s life that little bit easier by offering reliable, easy to use, time-saving functionality, while continuing to develop new features that further enhance what is already a formidable collection of applications

Michael Hargreaves

Microsoft Office 365/Dell XPS 15 2-in-1

I’d recommend a Dell XPS 15 2-in-1 and the new Windows 10 to anyone who needs to get serious work done (before you kick back on your couch with your favourite Netflix show.)

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?