Issues

Honeywell 2006

     RESOLVED that the stockholders of Honeywell International Inc. (“Honeywell”) amend the bylaws to replace the last sentence of Article II, section 7, which currently provides for a majority vote standard for all matters other than director election, with the following sentence:

     “At each meeting of Stockholders, except as otherwise provided by law or in the Certificate of Incorporation or these By-laws, in all matters, the affirmative vote of the majority of shares present in person or represented by proxy and entitled to vote on the subject matter shall be the act of the Stockholders; provided, however, that in an election of directors, if the number of nominees exceeds the number of directors to be elected, the directors shall be elected by the vote of a plurality of the shares represented in person or by proxy at any such meeting.”

 

SUPPORTING STATEMENT

 

     Currently, Honeywell uses a plurality voting standard for director elections, which means that the nominee who receives the most votes will be elected.  Nearly all corporate director elections are uncontested; in other words, there is only one candidate for each open seat.  In uncontested situations, a plurality voting standard ensures that a nominee will be elected even if holders of a majority of shares voting exercise their right to withhold support from the nominee on the proxy card.  Indeed, under plurality voting, a nominee could be elected by a single share.

     Section 216 of the General Corporation Law of Delaware, where Honeywell is incorporated, allows a corporation to deviate from the plurality vote default standard by establishing a different standard in its charter or bylaws.  This proposal would do that by amending Honeywell’s bylaws to require directors in uncontested elections to be elected by a majority of shares voting at a meeting. 

     We believe that a majority vote standard for director election would foster a more robust system of board accountability.  Under Delaware case law, the power of stockholders over director elections is supposed to be a safety valve that justifies giving the board substantial discretion to manage the corporation’s business and affairs.  Requiring a nominee to garner majority support among stockholders—thus giving stockholders’ withhold votes real meaning--would help restore this safety valve. 

     We believe Honeywell stockholders would benefit from increased accountability. The Corporate Library recently gave Honeywell’s board a D for overall effectiveness and an F for CEO compensation practices.  Stockholder value has suffered; according to the 2005 proxy, $100 invested in Honeywell stock on December 31, 1999 would have been worth $68 on December 31, 2004, while $100 invested in an index of peer companies would have been worth $114 on that date.  
 
     A growing number of stockholders support a majority vote standard for director elections. The Council of Institutional Investors recently adopted a new policy in favor of it. At approximately 60 annual meetings in spring 2005, support for proposals urging a majority vote standard averaged 44 percent, with 16 proposals receiving majority support (source: Institutional Shareholder Services).

 

Print Version
 

Sheila Hill
Local 1319, Maryland

Sheila Hill

"I've worked hard for my pension, and my union works hard to protect it. We want to ensure that our pension investments keep companies and CEOs honest and our retirement secure."