(Continued)
Proposal 2 — Cumulative Voting
Nick Rossi, P.O. Box 249, Boonville, CA 95415, claiming beneficial ownership of 500 shares of common stock, submitted this proposal. RESOLVED: Cumulative Voting. Shareholders recommend that our Board adopt cumulative voting. Cumulative voting means that each shareholder may cast as many votes as equal to number of shares held, multiplied by the number of directors to be elected. A shareholder may cast all such cumulated votes for a single candidate or split votes between multiple candidates, as that shareholder sees fit. Under cumulative voting shareholders can withhold votes from certain nominees in order to cast multiple votes for others. Cumulative voting won 54%-support at Aetna and 56%-support at Alaska Air in 2005. It also received 55%-support at GM in 2006. The Council of Institutional Investors www.cii.org has recommended adoption of this proposal topic. CalPERS has also recommended a yes-vote for proposals on this topic. Cumulative voting encourages management to maximize shareholder value by making it easier for a would-be acquirer to gain board representation. Cumulative voting also allows a significant group of shareholders to elect a director of its choice – safeguarding minority shareholder interests and bringing independent perspectives to Board decisions. Most importantly cumulative voting encourages management to maximize shareholder value by making it easier for a would-be acquirer to gain board representation. Please encourage our board to respond positively to this proposal: Cumulative Voting– Yes on 2
The Board recommends a vote AGAINST this proposal.
Like most major corporations, the Company provides holders of common stock with one vote per share for each Board seat. The Board believes this method assures that each director is accountable to all stockholders and reduces the risk of factionalism on the Board. The Board believes that it would be unwise to alter the current voting procedure and that cumulative voting would not be in the best interests of stockholders as a whole. Cumulative voting could impair the effective functioning of the Board by permitting the “stacking” of votes behind potentially partisan directors, resulting in the election of directors obligated to represent the special interests of a small group of stockholders rather than all stockholders. This could foster a divided Board and undermine the Board’s ability to work together effectively to continue the Company’s superior long-term performance. Cumulative voting also allows stockholders a voice in director elections that is disproportionate to their economic investment in the Company. The Board believes that each stockholder should be entitled to affect the outcome of elections in a manner proportionate to his or her ownership. In addition, the Board believes that cumulative voting is unnecessary because the Company has strong governance provisions and practices in place that are responsive to stockholder concerns:
-
The Company has long had a confidential voting policy in uncontested solicitations.
-
The Company does not have a staggered Board. All directors are elected annually by the stockholders.
-
All nominees for director at the 2007 Annual Meeting received a “FOR” vote of at least 98% of votes cast at last year’s Annual Meeting.
-
All but two of the Company’s directors are independent.
-
The Nominating, Corporate Governance and Social Responsibility Committee, the Audit Committee, and the Compensation Committee of the Board are each comprised solely of independent directors.
-
Under the Virginia Stock Corporation Act (the Company is incorporated in Virginia), the Board does not have the right to increase the number of directors in any year by more than 30% without the approval of stockholders.
-
The Board has redeemed its stockholder rights plan and adopted a policy requiring it to obtain stockholder approval of any new plan.
Last year, the Board amended its By-laws and Corporate Governance Guidelines to adopt a majority vote standard in the election of directors in uncontested elections. Shareholders are now able to vote against directors of whom they disapprove. A nominee in an uncontested election who does not receive a majority of votes cast must offer to tender his or her resignation to the Board. The Board believes that adoption of the majority vote standard is a much more effective means than cumulative voting of achieving the goals of safeguarding shareholder interests and encouraging the Board and management to seek to maximize shareholder value. In summary, this proposal would alter the current process for electing each director by the vote of all stockholders. The proposal could permit stockholders representing a relatively small minority of shares to elect a director representing their special interests. Because each director oversees the management of the Company for the benefit of all stockholders, the Board believes that the current system of electing directors best serves the interest of stockholders as a whole. For these reasons, the Board recommends a vote AGAINST this proposal, and proxies received by the Company will be so voted unless stockholders specify a contrary choice in their proxies. |