Today, National Legal and Policy Center presented an “Adopt Cumulative Voting” proposal at the annual meeting of American Airlines Group, Inc.
Board elections are usually conducted on a majority voting basis, and shareholders can only vote “yea” or “nay” for each member across the entire slate. That means that a coalition representing 51% of shareholders can effectively control 100% of board seats. Cumulative voting would allow investors to aggregate their votes so that representation would be proportional to ownership. In theory, if you own 50% of the company, you would get to elect 50% of the board.
American Airlines’ board opposed the proposal, as explained on page 51 of the company’s proxy statement. NLPC responded to the board’s opposition statement in an exempt solicitation report circulated to the company’s shareholders.
Presenting the proposal was Paul Chesser, director of NLPC’s Corporate Integrity Project. His two-minute remarks can be heard here, and a transcript follows:
I’m Paul Chesser of National Legal and Policy Center, speaking in support of Proposal 7, which asks the Board to adopt cumulative voting in the election of directors.
This is a modest reform with a simple purpose — to give shareholders a stronger voice in who represents them on the Board.
The case for it begins with performance.
Over the past five years, an investment in this company has lost value, while the broader market has nearly doubled.
The company was dropped from the S&P 500.
And just last month, American Airlines reported another quarterly loss, even as its largest competitors performed better.
These results matter to the people at this meeting and the investors they represent.
Yet through this same period, executive and director pay has remained substantial.
And the company’s largest employee groups have voiced an extraordinary loss of confidence in current leadership.
When a board presides over results like these without real change, shareholders are entitled to ask whether they are well represented.
This reform offers an answer.
It does not hand control to any single group.
A majority of shares still elects a majority of directors.
What it does, is let shareholders who hold a minority position to pool their votes, and elect at least one director who reflects their concerns.
That is not a radical idea.
It is a basic principle of accountability.
A board that knows shareholders can elect a voice of their own, is a board that pays closer attention.
For these reasons, I urge my fellow shareholders to vote FOR Proposal 7.
Thank you.
All assertions made by Chesser in his above remarks are footnoted and can be found in NLPC’s exempt solicitation report, here. An executive summary of the report can be viewed here.
Read NLPC’s shareholder proposal for the American Airlines annual meeting here.
Listen to Chesser’s presentation of the proposal at the meeting here.
(Pictured above: American Airlines CEO Robert Isom)
