WILLIAMSBURG – On Sept. 21, Smithfield Foods Inc. shareholders approved a proposal to hold annual elections for its board of directors members. Smithfield's board members are now elected to staggered three-year terms.
The California Public Employees' Retirement System (CalPERS) proposal passed easily – 78.4 percent of the shares voted to approve the proposal. Results of this vote were announced at the Smithfield-based company's annual shareholders meeting at the Williamsburg Lodge.
CalPERS, which owns nearly 700,000 shares — or about 0.4 percent — of Smithfield, said it wanted all 12 of the company's directors to go in front of shareholders annually to increase accountability and improve the company’s financial performance.
Before the shareholder vote, Smithfield’s board of directors stated it believed this proposal was not in the best interests of the company and unanimously recommended a vote against it.
“With the standard three-year term, directors develop a more thorough understanding of the company’s operations, benefit from ongoing experience and are more able to focus on the company’s long-term strategies that are in the best interest of the company and its shareholders,” said a proxy statement from the company.
Given the current climate in which many qualified individuals are increasingly reluctant to serve on boards of public companies, the company could be placed at a competitive disadvantage in recruiting qualified director candidates if their service on the board could potentially be limited to a one-year period, the statement added.
The board also believes electing directors to three-year terms, rather than one-year terms, enhances the independence of non-employee directors by providing them with a longer assured term of office, thereby insulating them from pressures from special interest groups who might have an agenda contrary to the long-term interests of all shareholders.
The statement added longer terms have not diminished the accountability of the company’s directors, but instead have had the effect of encouraging the directors to consider the long-term effects of their decisions.
Despite the board’s opposition to the proposal, C. Larry Pope, Smithfield's president and CEO, said after the meeting he anticipates the board to adopt the new rule. Should Smithfield’s board choose to adopt the measure, it would be put before shareholders next year for another vote. More than two-thirds of outstanding shares must be voted in favor of the change because altering board members' terms requires an amendment to the company's articles of incorporation.