Nabors Industries Ltd. shareholders apparently scored an industry first on Tuesday, approving a nonbinding resolution giving them power to oust members of the drilling contractor’s board of directors. The proxy access resolution is said to be the first successfully passed by shareholders of a major company.
Under preliminary results announced at the annual meeting in Hamilton, Bermuda, Nabors would have to allow large investors to list competing board candidates on official company ballots.
The nonbinding resolution, which was proposed by public pension funds in California, Connecticut, Illinois, New York and North Carolina, asked directors to adopt a bylaw allowing any shareholder with at least a 3% stake for three years or more to nominate competing candidates for up to one-quarter of the board’s seats.
In February former CEO Gene Isenberg agreed to terminate his employment contract and waive a $100 million claim that was triggered when Anthony G. Petrello was promoted to CEO (see Daily GPI, Feb. 7). Isenberg’s contract had provided him with $100 million in cash and other perquisites under a severance-type payment, for which Nabors’ board was sharply criticized.
Proxy ballots list only management’s nominees for the board, which forces shareholders to spend extra time and money to distribute informational letters and separate ballots before the annual meeting in hopes of drawing enough votes to shake up a company’s practices.
The Securities and Exchange Commission (SEC) in 2010 imposed a proxy access rule. However, last year the U.S. Circuit Court of Appeals in Washington, DC, ruled in favor of business groups and tossed it. The three-judge panel said the SEC had not adequately analyzed the costs to U.S. companies of fighting the access rule in contested board elections and had failed to back up a claim that the rule would improve shareholder value and board performance.
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