Soup to nuts

Shareholder votes served with too much Apple sauce

Talk about mixing Apple and oranges. Corporate America keeps tossing multiple proposals into a single ballot initiative, despite a landmark 2013 ruling that ripped the iPhone maker for doing so. Such bundling also turns out to be a lot more common than suspected.

The problem first emerged in the 1980s, when companies would offer plans to combine a special dividend with a new class of voting stock for management. Shareholders would choose to entrench bosses just to get the payout. The Securities and Exchange Commission responded in 1992 with regulations requiring a vote on every item separately.

The rules haven't helped much. Almost a third of single initiatives contain multiple topics, according to a new Vanderbilt Law School study, with pro-shareholder measures like squelching a poison pill often paired with ones that harm investors. The 1,500 proposals studied predate 2013, however, at least leaving room for the possibility that the situation has improved.

The Apple case offered plenty of incentives. A federal judge forced the $745-billion company to unbundle four charter amendments, including one limiting its ability to issue preferred stock. Apple boss Tim Cook called the lawsuit, filed by David Einhorn's Greenlight Capital, a "silly sideshow."

The SEC seemed to agree, unfortunately. Last year, it opened loopholes in its anti-bundling rules, allowing "inextricably intertwined" items or a "material matter" and "immaterial matters" to be combined. The agency also failed to define those fuzzy terms.

Confusing rules probably help explain the practice's persistence. Renewable fuels company Aemetis, for example, paired a plan to stop shareholders from voting by written consent with one to put only a third of the board up for election each year. The SEC ordered the items separated in March. Tobacco maker Lorillard, nanotechnology company Dais Analytic and many others also have overstepped the bundling bounds this proxy season.

Companies argue vote-bundling is efficient and saves money. That's a stretch. It's hard to imagine how the commission's 1992 regulations and the Apple decision could be clearer: Shareholders have the right to vote on each item separately. In terms of governance fixes, it's low-hanging fruit.