CCA tweaks proxy access rules

AUTHORS Geert De Lombaerde

Jan. 15, 2016

The board of Corrections Corp. of America has tweaked the company's bylaws to allow longtime investors to more easily nominate director candidates.

Nashville-based CCA's move on so-called proxy access means an individual stockholder or a group of up to 20 investors owning at least 3 percent or more of the company for at least three years can now place board nominees on the company's official proxy statement. Such investors could try to obtain up to a quarter of CCA's board seats, which currently number 11.

The bylaws amendment comes in response to a letter from Alex Friedman, an activist who has prodded CCA and other private prison management companies on numerous other governance issues over the years. But CCA also has made itself part of a growing trend: Investors filed about 100 formal proposals last year to change companies' bylaws and more than half of them received majority support from their fellow shareholders. Most of those proposals have used the same 3-percent-and-three-years standard CCA has adopted; those benchmarks were part of a rule proposal floated by the Securities and Exchange Commission earlier this decade.

"In recent years, investors have increasingly sought confirmation that boards have the skill sets and expertise needed to provide strategic counsel and oversee key risks facing the company, including environmental and social risks," Ann Yerger, executive director at the EY Center for Board Matters, wrote last summer for the Harvard Law School Forum on Corporate Governance and Financial Regulation. "Many investors have also raised concerns regarding the lack of turnover on boards, pushed for increased gender and racial diversity on boards, sought greater disclosure around director qualifications and continued long-standing campaigns to make annual director elections under a majority vote standard common practice among S&P 1500 companies."

Ed. Note: PLN managing editor Alex Friedmann filed a proposed shareholder resolution with CCA, which led the company to amend its bylaws to permit proxy access.