SRI investors reject shareholder proposal on “proxy access” at Cisco Systems

SRI investors such as Calvert Investments, Trillium Asset Management, Domini Social Investments and Christian Brothers Investment Services have rejected a shareholder proposal calling for proxy access, or the right of the firm’s shareholders to nominate their own board candidates, at Cisco Systems, according to voting disclosures ahead of the Internet equipment firm’s AGM today (November 20).

The proposal was filed by shareholder rights advocate James McRitchie. It would enable shareholders with even slight holdings in the company to nominate candidates for up to 40% of Cisco’s board. In his proposal, McRitchie said Cisco’s board badly needed new members due to “ageing, lack of experience and poor meeting preparation.”

He added: “Other issues specific to Cisco include the company’s poor stock performance compared with the S&P 500 over the past five years and the fact that the CEO’s pay is far above average.”

It comes as proxy access has become a hot topic at US firms, with New York City Comptroller Scott Stringer spearheading the new “Boardroom Accountability Project” (BAP) and the recent ‘proxy access’ proposal put forward by a range of major investors at tech firm Oracle getting 45% shareholder support.

Stringer’s proposal would, for example, only allow shareholders that, individually, have held 3% of company stock for at least three years to nominate board candidates. Those candidates would, furthermore, comprise a maximum of one-quarter of the board.

Stringer’s proposal is now going to 75 firms including US oil giants ExxonMobil and Chevron, truckmaker Paccar and Netflix, the online video-streaming firm.For its part, Cisco’s board has urged the company’s shareholders to reject McRitchie’s proposal, noting that the high percentage of candidates he seeks could “impede” the board without an “optimal mix of experience, skills and perspectives”.

Cisco also says the proposal would enable shareholders with scant exposure to the company to possibly “pursue a strategy that benefits short-term interests over the interests of our long-term shareholders.”

Said Calvert and Trillium, on the ProxyDemocracy site: “A vote against this item is warranted because the proposed access right lacks the parameters necessary to balance a meaningful right to participate in the director nomination process with the necessary safeguards.” CalSTRS, the California pension giant, has also disclosed a vote against the proposal.

Like Cisco, Calvert and Trillium believe that the right of small shareholders in the firm to nominate up to 40% of the board “could risk excessive board disruption.”

Yet not all of Cisco’s big shareholders are opposing McRitchie’s proposal. One is the $181bn (€144bn) Florida State Board of Administration, which will vote for it today.

It’s not the first time McRitchie has filed a motion at Cisco. Last year his unusual proposal calling for a proxy advisor competition at the firm was soundly defeated. The idea was for the company to award cash prizes to the advisors that gave its shareholders the most useful advice in a bid to stir up the proxy advisory market.