Institutional Shareholder Services released its 2007 Board Practices study last week. This study examines the structure and compensation of S&P 1500 boards of directors. The most significant findings in the report was that the portion of S&P 500 companies with classified boards (boards where only a portion of the directors are elected each year) declined by 8 percent. This decline meant that 2006 was the first year that a majority of these companies held annual elections for all of their directors. Another important finding, although not particularly surprising in light of the ongoing scandals, was that the use of stock options has declined.
A quick tour through our posts of the last several months bears out the results of the ISS study. There can be no question that shareholders won many important battles this year. The real question for us, however, is whether this trend will continue or be reversed in 2007. As our readers know, there are legislative and administrative moves afoot to scale back Sarbanes-Oxley. At the same time, the courts seem unlikely to strike pro-shareholder blows anytime soon. So, while shareholders have enjoyed some success of late – largely through proxy initiatives and direct confrontations with their boards – we must all stay vigilant on this all important issue.
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