In addition, ISS ranks the companies relative to
their industry group. In the case of the companies
followed by Bellini, that would be the software and
services industry group.
So what distinguishes the companies at the top
from those at the bottom? Companies such as Intuit,
Microsoft and
Siebel Systems have a board controlled by a majority
of independent outsiders; a compensation committee
composed solely of independent outside directors; a
CEO who serves on the boards of two or fewer other
companies; directors who receive all or a portion of
their compensation in stock; and non-employee
directors who do not participate in the company's
pension plan, according to ISS and Salomon.
Companies at the bottom of the list,
such as Ariba, i2 and
Informatica, had some things in common, too: They allow their boards to amend bylaws without shareholder approval, they permit option repricing without shareholder approval, and they deny shareholders cumulative voting rights, which let individual investors apply all their votes to a single director.
In addition, the low-ranking companies had a classified board, which means the directors serve staggered terms, making it more difficult to launch a
proxy fight. i2 also has a poison pill in place that is not approved by shareholders, requires a 67% vote to amend certain provisions of the bylaws or charter, and its outside board members meet only when the CEO is present.
Some of the same policies exist at the companies
at the top of the list. Intuit, one of the few
software stocks to post gains since the beginning of
the year, has a former CEO on the board, stock-based incentive plans that have been adopted without shareholder approval, no term limits for directors and no cumulative shareholder voting rights.
But Intuit's positives far outweigh such
negatives, according to ISS. They include an audit
committee composed of only independent outside
directors; a full board that is elected annually; a
mandatory retirement age of 72 for directors;
board members with the authority to retain outside
advisers; a simple majority vote to amend the charter
or bylaws; a prohibition on option repricing without
shareholder approval; and a board-approved CEO
succession plan.
Ronna Abramson
RSS
