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The Case Against Mandatory Annual Director Elections and Shareholders' Meetings

45 Pages Posted: 12 Jun 2006  

William K. Sjostrom Jr.

University of Arizona - James E. Rogers College of Law

Abstract

The article examines the mandatory requirement under state corporate law and stock exchange listing standards that public corporations hold annual shareholders' meetings for the election of directors. Specifically, I question the value of requiring corporations to (1) elect directors annually, and (2) hold shareholders' meetings annually. I critique the various justifications for these requirements and find none of them persuasive. I then explore a different approach taken by Minnesota with respect to the frequency of director elections and shareholders' meetings and conclude that the approach is superior to the current scheme. Recognizing, however, that any less strict state approach is overridden by exchange listing standards requiring annual elections and meetings, I propose that these listing standards be abolished. This would give effect to the Minnesota approach, but more importantly, it would allow state laboratories to experiment with alternative rules with respect to the frequency of elections and meetings. Consequently, it would add another variable for consideration in connection with the various proposed corporate governance reforms (e.g., shareholder proxy access, proxy contest reimbursement, majority voting) under debate, some of which may impact the propriety of annual director elections and shareholders' meetings.

Keywords: Director elections, board elections, shareholders meeting, stockholders meeting, annual meeting, proxy contest

JEL Classification: G3, G34, K2, K22, K23, M1, M14

Suggested Citation

Sjostrom, William K., The Case Against Mandatory Annual Director Elections and Shareholders' Meetings. Tennessee Law Review, Vol. 74, 2006. Available at SSRN: https://ssrn.com/abstract=907474

William K. Sjostrom Jr. (Contact Author)

University of Arizona - James E. Rogers College of Law ( email )

P.O. Box 210176
Tucson, AZ 85721-0176
United States

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