On March 4th, 2016, General Motors’ directors added a new procedure to the company’s bylaws that changes how individuals can be nominated to the company’s board of directors.
In a filing with the Securities and Exchange Commission released Tuesday evening, GM disclosed that shareholders or shareholder groups will now be allowed to nominate directors for the board in the firm’s annual proxy statement. However, they will need to hold at least three percent of the automaker’s shares for at least three years.
In addition, shareholders groups that meet the share ownership standard will be able to nominate “up to two individuals, or 20 percent of the board, whichever is greater.”
The change is widely seen as a response to the skirmish caused by a group of hedge funds led by former U.S. auto task force member Harry Wilson in February 2015. Wilson attempted secure a seat for himself on GM’s board in order to accelerate the return of cash to shareholders. While not successful in the former, Wilson’s agenda did result in GM creating a comprehensive capital allocation framework that includes the repurchase of $5 billion of its stock as well as an increase in of the quarterly stock dividend to $0.36 per share.
Had the new ownership requirements been in place during Wilson’s campaign, they would have prevented the barnstorm. During that time, the group represented by Wilson held 1.9 percent of GM shares.