USA Law and Practice Contributed by: Matt Hurd, Melissa Sawyer and Scott Crofton, Sullivan & Cromwell LLP
such as stockholder approval) may subject such a transaction to a more deferential standard of review by the courts. Proxy Advisory Firms Guidelines The proxy advisory firms have published exten - sive guidelines that relate to board composi - tion. ISS and Glass Lewis guidelines stress that boards should be at least a majority independent, and have fully independent audit, compensation and nominating and corporate governance com - mittees and independent board leadership (ie, either an independent board chair or a lead inde - pendent director). ISS and Glass Lewis have also adopted board diversity policies in their proxy voting guidelines that generally provide for neg - ative vote recommendations against the chair of the nominating and corporate governance committee of companies that fail to maintain a specified level of board diversity (either in terms of gender or racial/ethnic diversity). The specif - ic minimum diversity thresholds differ between ISS and Glass Lewis, with Glass Lewis generally imposing a higher threshold. Investor Expectations Investors are increasingly focused on ensur - ing that boards of public corporations have a sufficient mix of skills and expertise to enable them to exercise effective oversight and make informed decisions regarding the management of the corporation. Although there are limited requirements on the specific skills and qualifi - cations directors must have, stockholders have submitted a number of proposals over the last few years seeking the representation of specific skills on boards, such as cybersecurity, sustain - ability or corporate governance experts. In response, corporations are increasingly high - lighting the skills and experiences represented on their boards by publishing skill matrices or
other graphics that identify certain key skills that are relevant to the board’s ability to over - see the corporation’s business, such as finance and accounting, international, risk management and cybersecurity/technology expertise, and the specific directors (or aggregate number of direc - tors) on the board that possess those skills. 4.4 Appointment and Removal of Directors/Officers Directors of US public corporations are typically elected at stockholder meetings by the vote of a majority of the stockholders present and entitled to vote (although some corporations may have plurality voting depending on state law and the corporation’s organisational docu - ments). In majority voting, a nominee generally must receive more “for” votes than “against” or “abstain” votes to be elected (or re-elected) to the board. In plurality voting, the nominees who receive the most “for” votes are elected (or re- elected) to the board until all board seats are filled. As a result, under plurality voting, in an election where the number of nominees is equal to the number of available board seats (ie, an uncontested election), every nominee would be elected upon receiving just one “for” vote. In most states, including Delaware, once a direc - tor has been elected, he or she may only be removed before the expiration of his or her term by the corporation’s stockholders or upon his or her resignation. Typically, stockholders may remove a director with or without cause by a majority vote. However, if the board is staggered or the corporation permits cumulative voting, a director may only be removed for cause unless otherwise provided in the corporation’s certifi - cate of incorporation. In the event there is a vacancy on the board (either because of a director’s removal, resigna -
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