Calvert Investments' Take

The proponent believes the election of directors is the strongest way that shareholders influence the directors of any corporation. Currently, our board of directors is divided into three classes with each class serving three-year terms. Because of this structure, shareholders may only vote for one-third of the directors each year. This is not in the best interest of shareholders because it reduces accountability. Xcel Energy Inc., Devon Energy Corporation, ConocoPhillips, ONEOK, Inc., Centerpoint Energy, Super-Valu Stores, Inc. XTO Energy, Inc. have adopted this practice upon the presentation of this proposal by the proponent and in 2009, the proponent’s proposal has been approved by shareholders of Avista Corp., Comerica Incorporated, Chesapeake Energy Corp., First Financial Bancorp., Cincinnati Financial Corp., and Ecolab, Inc. where it received a 72.7% favorable vote. The proponent is a professional investor who has studied this issue carefully. The performance of our management and our Board of Directors is now being more strongly tested due to economic conditions and the accountability for performance must be given to the shareholders whose capital has been entrusted in the form of share investments. A study by researchers at Harvard Business School and the University of Pennsylvania’s Wharton School titled “Corporate Governance and Equity Prices” (Quarterly Journal of Economics, February, 2003), looked at the relationship between corporate governance practices (including classified boards) and firm performance. The study found a significant positive link between governance practices favoring shareholders (such as annual directors election) and firm value. While management may argue that directors need and deserve continuity, management should become aware that continuity and tenure may be best assured when their performance as directors is exemplary and is deemed beneficial to the best interests of the corporation and its shareholders. The proponent regards as unfounded the concern expressed by some that annual election of all directors could leave companies without experienced directors in the event that all incumbents are voted out by shareholders. In the unlikely event that shareholders do vote to replace all directors, such a decision would express dissatisfaction with the incumbent directors and reflect a need for change. If you agree that shareholders may benefit from greater accountability afforded by annual election of all directors, please vote “FOR” this proposal.