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Lexmark board disagree with shareholder proposal

April 23, 2012

OEM’s board of directors appeal against state treasurer’s proposal for an elected board.

News website reports that the North Carolina state treasurer has proposed that Lexmark should “declassify its board”, allowing shareholders to annually elect the company’s board of directors.

The proposal will be voted on by Lexmark’s shareholders, who the company’s board of directors have advised should reject the idea, stating that “Without a classified board structure, the replacement of all directors in a single year is possible, which could lead to a short-term disruption in the affairs of the company”.

However, the state treasurer noted that “having directors stand for elections annually makes directors more accountable to shareholders and could thereby contribute to improving performance and increasing firm value.”

North Carolina officials have made the same proposal to 25 different companies as part of the Harvard Law School Shareholders Rights Project, which aims to improve corporate governance by pairing students with public pension funds. So far, 14 of those companies have agreed to hold annual board elections.

Although shareholders can vote in favour of the proposal, the outcome will be “advisory only”, meaning that Lexmark would not be required to act on the decision.

The Recycler recently reported on Bernstein researcher Toni Sacconaghi’s prediction that Lexmark is “likely to be shut down”, after he cut his stock target of Lexmark from $46 (€34) to $38 (€28), with the company closing at $34.28 (€25.68) in March.

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