HR Administration

Shareholders Demand Better Window Into Succession

By Michelle Rafter

Jun. 18, 2010

B uried inside Bank of America’s 2010 proxy statement is a shareholder resolution that requires the company’s board to give stockholders details of how they’d pick a new CEO if the current one gets sick, quits or—as CEO Ken Lewis did in 2009 with calamitous results—unexpectedly announces his retirement with no clear successor in place.


Whole Foods Market’s 2010 proxy included an almost identical resolution, put forward by the Laborers National Pension Fund, a Texas-based labor union retirement fund that owns shares in both companies.


The resolutions are among the first to surface following revisions in Securities and Exchange Commission guidance governing CEO succession planning.


In the end, neither BofA nor Whole Foods shareholders adopted the resolutions, which both companies’ boards opposed.


But while some Fortune 1,000 companies have fought the changes as unnecessary and potentially harmful, others are working with shareholder groups to make policies more transparent in an effort to stave off a proxy-vote battle.


“Succession planning is quickly moving from a staff administrative exercise to a risk management process driven by investors,” says Jeff McCutcheon, an executive pay expert with consultant Board Advisory LLC.


Historically, the SEC treated CEO succession planning as “ordinary business matters—information that companies weren’t required to share with shareholders.


But in an October 2009 legal bulletin, the agency reversed its position, saying that “recent events” underscored the importance of a board’s role in choosing a company’s top executive.


Preparing for an orderly transition from one CEO to another is an area that corporate boards agree they need to work on. In a 2009 survey, the National Association of Corporate Directors found that 89.2 percent of corporate directors ranked CEO succession as critical, while only 15.7 percent saw themselves as highly effective in that area.


One of the first resolutions put to a vote was at Whole Foods’ March 8 annual meeting. The proposal didn’t pass, but 30 percent of the food chain’s shareholders approved it. That’s not bad for a first-time resolution, according to O’Dell, who says succession planning will be the main focus of the fund’s shareholder resolutions in 2011.


BofA and Whole Foods officials did not return calls requesting comment. However, in its 2010 proxy, BofA’s board urged against approving the proposal, saying its existing corporate governance guidelines address succession planning and that information on the process “is expected to be included annually in our proxy materials.”


Given the circumstances of Lewis’ retirement and the lawsuits filed because of it, industry watchers expected—and got—fireworks at BofA’s annual meeting. In the end, 40 percent of the bank’s shareholders voted in favor of the resolution—not enough for it to pass, but enough to send a powerful message, according to McCutcheon.


The fact that so many shareholders voted for it against management recommendation indicates “substantial support for increased transparency around Bank of America’s executive succession management,” he says.


Workforce Management, June 2010, p. 14Subscribe Now!

Michelle Rafter is a Workforce contributing editor.

What’s New at Workforce.com?

blog workforce

Come see what we’re building in the world of predictive employee scheduling, superior labor insights and next-gen employee apps. We’re on a mission to automate workforce management for hourly employees and bring productivity, optimization and engagement to the frontline.

Book a call
See the software

Related Articles

workforce blog

Compliance

Minimum Wage by State in 2023 – All You Need to Know

Summary Twenty-three states and D.C. raised their minimum wage rates in 2023, effective January 1.  Thr...

federal law, minimum wage, pay rates, state law, wage law compliance

workforce blog

HR Administration

Is your employee attendance policy and procedure fit for purpose?

Summary: Lateness and absenteeism are early warning signs of a deteriorating attendance policy. — More ...

compliance, HR technology, human resources

workforce blog

HR Administration

Clawback provisions: A safety net against employee fraud losses

Summary Clawback provisions are usually included as clauses in employee contracts and are used to recou...

clawback provisions, human resources, policy