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Director elections are often overlooked by many investors, even though their results can shape a company’s future strategy and operations. A board of directors is generally elected once per year at the company’s annual general meeting (AGM). Most of the time, these elections are uncontested, meaning that only the incumbent candidates nominated by the current board are up for a vote. In a contested election (which can occur if an activist investor launches a proxy fight), outside candidates may be put up for a vote and only a handful of the nominees will actually take the mantle.

In this article, we’ll go over six director elections that were surprisingly close, given that they were uncontested by any outsiders. Incumbent directors typically garner over 90% approval in uncontested elections, so anything much lower than that figure indicates dissatisfaction amongst investors.
 

Apple (AAPL)

Apple’s board is composed of 9 people, each serving one-year terms. Here are the voting results from their 2023 AGM.

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All the directors were elected with at least 90% approval. The weakest showing was from Al Gore, who faced a campaign by the National Legal and Policy Center. The NLPC called for the removal of Gore from the board, due to his environmental activism, which they believed damaged his credibility. Gore’s ultimate victory indicates that his long tenure on Apple’s board isn’t coming to a forced end anytime soon.
 

Tesla (TSLA)

Tesla has a staggered board of 8 members who are divided into three classes, each serving three-year terms. Staggered boards have increasingly fallen out of use in recent years, due to their ability to entrench incumbents from market forces and accountability to shareholders. Here are the voting results for the election of directors at Tesla’s 2023 AGM.

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This election was particularly interesting, as Robyn Denholm (Chair of Tesla’s board) only garnered 74% approval. That result is dangerously low and indicates that shareholders may want someone else to take the Chair position (or for Denholm to be removed entirely). JB Straubel is a co-founder of Tesla and previously served as CTO for 15 years or so. This election marks his first year on the board of Tesla, although he came in just below the standard 90% threshold.
 

McDonald’s (MCD)

McDonald’s board of directors is composed of 13 people, each serving one-year terms. Here are the voting results from their 2023 AGM.

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As you can see, only one director (Enrique Hernandez, Jr.) fell slightly below the expected threshold, with an 87% approval rating. A result like this isn’t a huge cause for concern, but it is notable since Mr. Hernandez is actually the Chairman of MCD’s board. The anomaly indicates that shareholders may seek a change in board leadership, although it doesn’t necessarily mean shareholders want to see Hernandez be ousted.
 

ServiceNow (NOW)

ServiceNow’s board consists of 11 directors, although this election was somewhat unusual. Only 10 of the candidates were initially nominated for re-election. One candidate, Deborah Black, was only added to the nomination later in the process. The move is likely the result of either an internal dispute or personal uncertainty by Ms. Black about continuing her directorship. Here are the voting results.

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Two directors had very poor showings here: Susan Bostrom (at 83%) and Jonathan Chadwick (72%). These results indicate shareholder dissent and some candidates could be easy targets for activist investors looking for a change. If the company were to underperform for a prolonged period of time, then it could certainly become subject to activist interest.

Deborah Black was elected in a separate proposal and earned a very high approval rating of 98%. Also worth noting in this meeting is that shareholders rejected the company’s executive compensation plan with almost 60% disapproval. Although the vote is non-binding, it discourages management from moving forward with the stated plan.
 

Starbucks (SBUX)

Starbucks’ board has 8 directors, each with one-year terms. All were elected with over 90% approval except for Jorgen Vig Knudstorp, who came in at 84%. Here are the voting results.

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Knudstorp’s results were likely the result of campaigns by unions, seeking to pressure the company to provide better treatment for employees. Notably, shareholders did approve a proposal regarding a third-party assessment of worker rights.
 

Moderna (MRNA)

Moderna has a staggered board, and three directors were up for election at their 2023 AGM. The voting results were generally weak, with two directors receiving dangerously low levels of support: Stephen Berenson (71%) and Paul Sagan (68%).

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Investors may be seeking change in company leadership, as Moderna's stock has underperformed relative to the market coming out of the COVID-19 Pandemic.
 

Conclusion

As we've explored, director elections, though often overlooked, can provide valuable insights into shareholder sentiment, potential operational shifts, and the company's future trajectory. While the majority of these six elections from 2023 were uncontested and saw their nominees securing their seats, the lower-than-average approval rates indicate an undercurrent of investor dissatisfaction.

In the case of companies like Tesla, ServiceNow, and Moderna, this dissatisfaction has come perilously close to affecting board compositions, indicating possible investor appetite for change. For Apple, McDonald's, and Starbucks, the less-than-expected approval ratings were more surprising, but not immediately worrying. However, such results suggest that some investors are questioning the status quo.

In conclusion, investors should not underestimate the importance of director elections. A closer look at these votes can uncover early signs of shifting sentiments, providing proactive investors with the opportunity to adapt their strategies accordingly. As we move forward into the year, these six companies will certainly be interesting to watch, as will others that face unexpected challenges in their director elections.

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