With the Securities and Exchange Commission's controversial shareholder proxy access proposal stalled, another corporate governance battle has come to the forefront: a majority-vote standard for director elections. There seems to be considerable momentum for making the change, with a number of stakeholder campaigns underway to encourage companies to require a majority vote of ballots cast in the election of directors. Under the plurality-vote standard that is now common, since director elections are usually uncontested, candidates win as long as they get a single affirmative vote, no matter how many votes are withheld.

An American Bar Association (ABA) task force is considering whether to amend the Model Business Corporation Act and a group of unions and corporations is looking at what a majority-vote standard would involve. During the current proxy season, shareholders at more than 60 companies will vote on resolutions calling for a majority-vote standard. The resolutions, put forward by a group of unions, have some powerful supporters, including Institutional Shareholder Services. In mid-April, majority-vote resolutions won 48% of the votes at Gannett Co. and 38% at Caterpillar Inc. That's a big improvement from 2004, when the best showing by similar resolutions was 18% in favor.

Critics question whether a change is necessary, claiming that withhold votes have evolved into an effective tool for dissatisfied shareholders. "There's ample evidence that nominating committees are carefully looking at any board member who receives a substantial withhold vote and not renominating them to a board," says David Hirschmann, a senior vice president at the U.S. Chamber of Commerce. In response, advocates of the change note that in 2004, a number of directors continued to serve on boards although they received less than 50% of the votes cast.