By Paul Hodgson – CCO and Senior Research OfficerSeveral high-powered institutional shareholders, such as CalSTRS, have indicated that they are going to vote against a number of Wal-Mart directors who, frankly, should have known better. While institutions such as CalSTRS do not often go public with their voting intentions, when they do, you know it is because they wish to gain both traction and support for their point of view.
Not only that but most of the major proxy advisory firms have recommended that shareholders vote against those same directors. These directors include Lee Scott, former CEO of Wal-Mart, who should not be on the board in any case, as he is not independent and there are few enough independent board members as it is. They also include Christopher Williams, the chairman of the audit committee. To my mind, given his fairly evident knowledge of the scandal, I would expect Lee Scott to be the prime target of negative voting, and he may even be a sacrifice the company is willing to make.
As most commentators have already noted, there is no way, assuming that the Walton family votes and the insider (director and officer) votes all vote with management, that any kind of shareholder revolt will result in a majority of the outstanding shares being cast against any of the directors, or, for that matter, for any shareholder resolution, or against any other management resolution (though watch out for that Say on Pay vote!). The Walton family owns 49.81% of outstanding stock, according to GMI Ratings data, the insiders (offices and directors who are not Walton family members) own an additional 0.31% of stock. So the majority is theirs. On the other hand, that leaves just under 50% of publicly held shares that could be voted either way. If even half of those are voted against directors or against management (25% of the outstanding stock), then that would represent a majority of public shareholders.
After all, Wal-Mart is not News Corp, another controlled company to face serious shareholder dissent, but one which ignored what its shareholders thought through depriving them of any voting power. Wal-Mart does not have multiple classes of stock with different voting rights, currently it does not need such an anti-shareholder provision. Also Wal-Mart seems much more chary of its reputation and good name, despite all the social problems it has encountered recently, and even if a majority of “public” shareholders vote against certain directors – although not an absolute majority – this may be enough for the company to seek to come to some compromise.
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