Zombie Directors Should Exit U.S. Boardrooms

When I testify before Congress about corporate governance, I like to watch the faces of the committee members when I explain the rules for electing corporate directors. “I know you, better than anyone else, understand what the word ‘election’ means,” I say. “Well, in the wacky world of public corporations, you win even if 99 percent of the shareholders vote against you.”

Except for the fraction of cases where someone nominates a competing slate of candidates and undertakes the multimillion-dollar expense of a proxy contest, management’s nominees are routinely elected to the board. Dozens of directors continue to serve, like boardroom zombies, even after a majority of the shareholders voted against them. In the past three years, about 200 directors failed to receive majority votes. Almost all of them continued as board members.