Napa, CA - Harrington Investments, Inc. (HII) today congratulated the Board of Directors of Seattle, Washington-based Starbucks Corporation (SBUX) for amending their corporate bylaws to require a majority vote to elect the board of directors.
"We have had a dialogue with SBUX over several years to insure that shareholders are not forced to accept self-nominated directors to represent their interests on the SBUX board," said John Harrington, President and CEO of HII. "Now an SBUX nominee for the board will be required to receive a majority of the shareholder votes cast at the annual shareholders meeting to be elected."
Harrington explained that prior to the adoption of the bylaw, the SBUX board could be elected by a plurality of shareholder votes. That meant that if just one vote was cast “for" all of the nominees they would all be elected. Shareholders could only vote "for," "abstain," or "withhold." This system of electing directors, it has often been pointed out, bears certain resemblances to the former Soviet Union’s style of democracy.
"A 'withhold' vote is not a vote 'against' a director," Harrington said. "If a majority of the shareholders vote 'withhold,' under plurality voting, all of the directors are still elected."
In 2005 HII was also successful in convincing SBUX to 'declassify' its Board of Directors election process, requiring the entire Board of Directors nominees to stand for election each year. 'Classification' is the practice of staggering Board elections over several years and has the effect of preventing unwelcome corporate buyouts-since only one-third of the directors are elected every year, a prospective purchaser cannot gain control of the board for at least two years.
Harrington concluded by saying: "I’m very pleased that SBUX will now allow shareholders to have the opportunity to vote 'against' director nominees that do not represent the fiduciary interests of owners. The next logical step is to allow shareholders to nominate directors. Self-nomination by the board of directors is a clear conflict of interest that will need to be addressed by SBUX shareholders in the future. Owners should nominate and elect directors who will serve as fiduciaries in the interests of all shareholders. Ownership and control should not be separated."
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