We routinely evaluate Microsoft’s governance policies to ensure they are meeting the needs of our diverse shareholders. At times, this process also includes an evolution of our practices in response to broader developments in corporate governance.
One of the most recent examples was in August 2015, when we were one of the first companies to proactively adopt a “Proxy Access for Director Nominations” bylaw. The bylaw permits a Microsoft shareholder or a group of up to 20 shareholders owning 3 percent or more of Microsoft’s outstanding shares continuously for at least three years to have the ability to nominate two individuals or 20 percent of the board’s seats (whichever is greater), provided the shareholders and nominees satisfy the requirements specified in the bylaws. We believe these criteria maintain an appropriate equilibrium by ensuring that a candidate nomination is supported by shareholders representing a significant but attainable proportion of outstanding shares.
I’m pleased to share that this week, our board voted to refine this bylaw based on perspectives offered by institutional investors over the past year. These changes will:
- Clarify how to count a group of funds as a single shareholder, consistent with the intent that a group of sufficiently related funds be counted as one;
- Better match the treatment of shares loaned by investors with investment industry practice; and
- Harmonize the threshold for shareholders resubmitting a nominee with our board’s recent decision to lower the percentage of shareholders required to call a special shareholder meeting.
I also want to take this opportunity to elaborate on the last point. In 2009 we amended our corporate charter to give shareholders representing 25 percent of shares outstanding the right to call a special shareholder meeting. We did so because we recognized the right to call special meetings was becoming an important element of good corporate governance.
At this year’s Annual Shareholders Meeting on Nov. 30, our board will propose to expand this right for shareholders with an amendment that would lower the shares required to 15 percent. We believe this change puts Microsoft squarely in the mainstream of established practice. Based on discussions with shareholders and a review of voting results on proposals relating to shareholder-initiated special meetings, we also believe this change is broadly supported among significant institutional investors, proxy advisors, and other governance advocates.
Additional information about this action will appear in our annual meeting proxy materials that we will begin distributing in mid-October.
These changes reflect our willingness to adapt our approach to governance in response to lessons learned by others, feedback from our shareholders, and the changing governance environment. Accordingly, we deeply value the continued interest of and feedback from our shareholders, and are committed to maintaining our active engagement with shareholders to ensure a diversity of perspectives are thoughtfully considered. As we move closer to our Annual Shareholders Meeting, we invite you to write us at [email protected] about the Board of Directors or corporate governance at Microsoft.