USA: 'say on pay' vote at the Motorola general meeting

Motorola Inc., incorporated in Delaware, held its annual stockholder meeting earlier this month. The voting results are available here. Stockholders were given a non-binding vote on the company's remuneration policy. Although more votes were cast in support of the policy (887,793,923) than against (855,021,547) it was defeated when the number of abstentions (201,440,789) were taken into account. This would appear to be the first time that an American company has lost a 'say on pay' vote (although there is currently no legal or regulatory obligation to provide such a vote).

The abstentions were included in determining whether the resolution was passed because the company's bylaws (Section 4, page 5; available here, pdf) provided that "the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, except as otherwise required by Delaware law, the Certificate of Incorporation, or these Bylaws".

In the absence of such a provision a default rule is provided by Section 216(2) of the Delaware General Corporations Law as follows: "[in] all matters other than the election of directors, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders". For judicial discussion of Section 216, see Licht v. Storage Technology Corp., et al. (C.A. No. 524-N, 2005): here (pdf).