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May 15, 2002
EMC Shareowners Vote for a More Independent and Diverse Board
by William Baue
At the recent EMC annual meeting, a board independence resolution received majority support, while
a board diversity resolution easily surpassed the SEC threshold for resubmission.
SocialFunds.com --
What defines the success of shareowner resolutions may be in the eye of the beholder--some may
judge by the tally of the vote, while others may take a longer view, keeping in mind that a
resolution's ultimate goal is to effect corporate change.
 Take, for example, the two shareowner
resolutions that were up for vote at the recent annual meeting of data storage market leader EMC Corporation (ticker: EMC). One
resolution, which proposed that a majority of the board be independent directors with no other ties
to the company, passed with 56 percent support from voting shareowners. The other resolution,
which asked that there be greater representation of women and minorities on the board of directors,
received 32 percent support. News reports of the meeting characterized the 32 percent vote as a
defeat.
"Reporters want to report on resolutions as political fights, where all that
matters is a majority vote, rather than as a business issue," said Elizabeth McGeveran, vice
president of governance and socially responsible investment at Friends Ivory & Sime, which cosponsored the
independence resolution. "If I were a company manager and I had 10, 20, 30 percent of my customer
base or my owners telling me the same thing, that would be a red flag. Thirty percent is a big
number in business."
According to U.S. Securities and Exchange Commission (SEC)
regulations, a shareowner resolution that receives ten-percent support from voting shareowners can
be refiled the following year, regardless of how many times the resolution has been filed in the
past. For sponsors of a resolution, exceeding the 10-percent threshold represents a success.
In comparison, no other shareowner resolution on this year's Interfaith Center on Corporate
Responsibility's Status Chart has garnered
more than 30 percent support.. Many resolutions that receive what may seem like little support are
ultimately resolved in the sponsors' favor, because the company decides to implement the proposed
practice. In some cases the proposal's own merits inspire company acceptance, and in other cases
companies opt to avoid the negative publicity that can accompany a refusal to respond to
shareowners.
The majority vote received on the board independence resolution represents an
unqualified victory for the sponsors, which also include the Calvert Group and Walden Asset Management, among others. What makes this
success even more significant is the fact that EMC's proxy card neglected to include descriptions
of the shareowner resolutions or even instructions regarding where to consult the proxy statement
for descriptions.
The Office of the Connecticut State Treasurer, which cosponsored the
diversity resolution, informed the SEC of the proxy card's apparent violation of rule 14a-4, which
requires clear and impartial identification of each separate resolution. The SEC did not respond
to either the State of Connecticut or EMC before the annual meeting. SEC spokesperson John Heine
told SocialFunds.com that the commission does not comment to the media on correspondence received
from companies or complaining parties. It therefore remains unclear whether EMC's proxy card
violated SEC regulations or not.
It also remains to be seen whether EMC will adopt either
proposal as policy, as both resolutions are nonbinding.
"With the board independence
resolution, we did win a majority, but that doesn't compel the managers to implement our
resolutions, which is another example of why this isn't political democracy," said Ms. McGeveran.
"In the question of board independence, the message was so loud and clear that EMC felt it couldn't
be ignored. Thirty-two percent is a similarly significant message."
EMC avowed support
for the spirit of both resolutions.
"EMC is committed to having a more independent board
and has taken significant steps toward that goal," EMC's Director of Public Relations Michael
Gallant told SocialFunds.com. "Since Mike [Ruettgers] has become Chairman, Win Priem, an
independent outsider, was added to the Board and the Board has been expanded to nine members,
leaving two vacancies on the Board to be filled."
Mr. Gallant also commented on board
diversity.
"EMC's Board is committed to identifying the most qualified candidates,
regardless of gender or ethnic background," said Mr. Gallant.
However, Mr. Gallant did not
confirm that EMC would actually fill the vacancies with independent, women, or minority candidates.
©
SRI World Group, Inc. All Rights Reserved.
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