(September 23, 2009): Target’s announcement in September that board members would stand for re-election each year came several months after a dissident proposal had failed to replace some members from the company’s board.

“We applaud Target for strengthening its accountability to shareholders,” said Wayne Kozun, Senior Vice-President of Public Equities for the Ontario Teachers’ Pension Plan (Teachers’). “Allowing investors to vote on all director candidates annually, instead of voting on a few each year, is an improvement that we believe leading companies should adopt.”

Teachers’ is a Target shareholder and voted in favour of replacing a number of directors at the company’s annual meeting last May.

The amendment to Target’s board structure will go to a shareholder vote at the company’s 2010 annual meeting. Teachers’ favours voting rights that allow shareholders to vote for directors annually and challenge boards in situations of deteriorating corporate performance – a view it has held consistently since the first publication of its proxy voting guidelines in 2000.

The guideline on classified (or staggered) boards notes that “we prefer the annual election of all directors” because “staggered terms for board members make it more difficult for shareholders to make fundamental changes to the composition and behavior of boards.”

More generally, Teachers’ advocates board independence and accountability to shareholders through an array of governance practices. “Annual voting is a good move,” Mr. Kozun said, “but companies should look at combining it with other practices that help to establish the right culture in the boardroom, such as separating the Chair and CEO roles, including independent directors and using a majority-vote standard.”

According to The Corporate Library, 56% of Russell 3000 companies have staggered boards. The number is lower for S&P 500 companies, with 39% employing this practice. A policy briefing titled “Chairing the Board: The Case for Independent Leadership in Corporate North America,” published by The Millstein Centre for Corporate Governance and Performance and the Chairman’s Forum, notes that 2008 data showed only 39% of S&P 500 companies have separate people acting as the chair and CEO.

Contact:

Deborah Allan
Director, Communications and Media Relations
Ontario Teachers' Pension Plan
(416) 730-5347
deborah_allan@otpp.com