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20 July 2012
US companies are undermining their own credibility by allowing executive board members to continue serving after losing shareholder votes.
Nell Minow, co-founder and director of governance consultancy firm GMI Ratings, told Bloomberg that too many businesses are going out of their way to continue to accommodate board members who have been voted against by more than 50 per cent of shareholders.
She observed that around 200 directors failed to receive majority votes in the past three years, but almost all of them have retained their positions on the board.
According to Ms Minow, this trend of "zombie directors" is impairing efforts to create true accountability among US businesses, while also inhibiting attempts to improve engagement and capability standards among leadership teams.
"The reality is that there can be no meaningful independence on the board if a majority vote of the shareholders has no consequence," she opined.
This echoes comments made by Harvard Law School professor Jesse Fried to Reuters last month, with the expert stating that the failure to adopt stricter voting standard suggests that a company "does not care about its shareholders".
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