Exploring Corporate Governance Around the World

By Allison Garrett, Senior Vice President for Academic Affairs at Oklahoma Christian University

Friday, January 20, 2006

Majority Voting for Directors

The ABA's Committee on Corporate Laws of the Section of Business Law released this week a Preliminary Report on possible amendments to the Model Business Corporation Act. The Preliminary Report follows the Discussion Paper on Voting by Shareholders for the Election of Directors that was issued in June of 2005.

Currently, the MBCA provides a plurality default rule for elections unless the corporation's articles of incorporation provide otherwise. The Committee is considering possible changes to the plurality default rule. The proposed amendments would allow adoption of the majority voting approach by either the board or shareholders.

Whether such a change is needed is questionable. Many corporations have already changed their articles of incorporation to provide for this. There is little to be gained in the near term, and a great deal of confusion that could be caused in the short term by such a change.

Additional comments on the Preliminary Report have been requested by February 20.

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