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Owner Proposal No. 5
Bartlett Naylor, 1255 N. Buchanan, Arlington,
VA 22205, has notified GE that he intends to submit the following proposal
at this year’s meeting:
“Resolved: The shareholders urge our
board of directors to take the necessary steps to nominate at least two
candidates for each open board position, and that the names, biographical
sketches, SEC-required declarations and photographs of such candidates
shall appear in the company’s proxy materials (or other required
disclosures) to the same extent that such information is required by law
and is our company’s current practice with the single candidates
it now proposes for each position.
“Supporting statement: Although our
company’s board appreciates the importance of qualified people overseeing
management, we believe that the process for electing directors can be
improved.
“Our company currently nominates for
election only one candidate for each board seat, thus leaving shareholders
no practical choice in most director elections. Shareholders who oppose
a candidate have no easy way to do so unless they are willing to undertake
the considerable expense of running an independent candidate for the board.
The only other way to register dissent about a given candidate is to withhold
support for that nominee, but that process rarely affects the outcome
of director elections. The current system thus provides no readily effective
way for shareholders to oppose a candidate that has failed to attend board
meetings; or serves on so many boards as to be unable to supervise our
company management diligently; or who serves as a consultant to the company
that could compromise independence; or poses other problems. As a result,
while directors legally serve as the shareholder agent in overseeing management,
the election of directors at the annual meeting is largely perfunctory.
Even directors of near bankrupt companies enjoy re-election with 90%+
pluralities. The “real” selection comes through the nominating
committee, a process too often influenced, if not controlled, by the very
management the board is expected to scrutinize critically.
“Our company should offer a rational
choice when shareholders elect directors. Such a process could abate the
problem of a chair “choosing” his own board, that is, selecting
those directors he expects will reflexively support his initiatives, and
shedding those who may sometimes dissent. Such a process could create
healthy and more rigorous shareholder evaluation about which specific
nominees are best qualified.
“Would such a process lead to board
discontinuity? Perhaps, but only with shareholder approval. Presumably
an incumbent would be defeated only because shareholders considered the
alternative a superior choice. Would such a procedure discourage some
candidates? Surely our board should not be made of those intolerant of
competition. Would such a procedure be “awkward” for management
when it recruits candidates? Hopefully so. (Management could print a nominee’s
name advanced by an independent shareholder to limit such embarrassment.).
The point is to remove the “final” decision on who serves as
a board director from the hands of management, and place it firmly in
those of shareholders.
“We urge you to vote FOR this proposal.”
Your Board of Directors recommends a vote
AGAINST this proposal.
GE believes that its practice of nominating
a single candidate for each director position is consistent with the longstanding
and widespread practice of major companies and is in the best interests
of the share owners. Your Board nominates the individuals whom it believes
are best qualified to serve as directors. Your Board does not believe
that nominating additional, less well qualified candidates would result
in a more effective Board. Because your Board does not believe that the
proposed change in the director nomination procedure is in the best interests
of the share owners, it recommends a vote against the proposal.
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