Safety Insurance Group Inc. shareholders have voted in favor of a proposal to adopt a majority voting standard in uncontested director elections at their May 22 annual general meeting.
Shareholder California Public Employees' Retirement System put forward the proposal, saying that Safety Insurance's existing voting system, which is a plurality voting standard that allows a director to be elected with only one affirmative vote because withheld votes produce no legal effect, strips shareholders of a "powerful tool" to hold directors responsible. Under the current system, defeating directors who run unopposed is impossible, but a majority voting standard allows shareholders to vote against candidates, according to CalPERS.
The board said it will take the shareholder-approved proposal under advisement. The shareholders have requested that the board start the process to amend the company's articles of incorporation and/or bylaws, though the plurality voting standard would still apply to contested director elections.
Prior to the annual general meeting, the board unanimously urged shareholders to vote against the proposal because it does not believe electing directors under a majority vote standard will lead to a "more effective" board. Also, it raised concerns about other consequences of adopting the proposal, such as a possible unnecessary increase in the cost of soliciting shareholder votes.