Wall Street Journal: Pulte Shareholders Rebuke Directors
Pulte executives believe shareholders were protesting the company's system for electing small groups of directors, every three years, as opposed to electing the entire board every year. For years, shareholder activists have criticized companies for holding these staggered, less frequent elections because it can prevent dissident shareholders from gaining sway over a board.The vote is an uncomfortable moment for Bloomfield Hills, Mich.,-based Pulte, which is trying to close its deal to acquire Centex Corp. to become the nation's largest home builder. The $1.3 billion all-stock acquisition is expected to close in the third quarter. See related video: Banks Demolish Houses in Austin... 

Pulte Shareholders Rebuke Directors

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Three Pulte Homes Inc. directors who were up for re-election failed to receive a majority of votes at the home builder's annual shareholder meeting, marking a rare rebuke of a company's board.

Pulte executives believe shareholders were protesting the company's system for electing small groups of directors, every three years, as opposed to electing the entire board every year. For years, shareholder activists have criticized companies for holding these staggered, less frequent elections because it can prevent dissident shareholders from gaining sway over a board.

The vote is an uncomfortable moment for Bloomfield Hills, Mich.,-based Pulte, which is trying to close its deal to acquire Centex Corp. to become the nation's largest home builder. The $1.3 billion all-stock acquisition is expected to close in the third quarter.

Fidelity Management & Research, the largest institutional shareholder, declined comment. But a smaller investor, The Trowel Trades, S&P 500 Index Fund, said in the company's proxy that Pulte's voting system insulates the directors and management from "consequences of poor financial performance."

One proxy advisor, Glass Lewis & Co., urged Pulte shareholders to withhold votes from certain board members to protest the builder's "underperformance" over the past three years. Glass Lewis said the company's stock performance was in the "bottom 25% of its peer group."

But Pulte chief executive Richard Dugas said in an interview that he thinks the withheld votes were driven primarily by the board's voting structure. "We strongly refute that this had to do with performance of the company,'' he said. He added that the company was one of the few builders with positive share performance in 2008.

Some shareholders have also complained that Pulte, like many builders, recently adopted a provision, which prevents buyers from acquiring more than 4.9% of the company's shares. Pulte says the provision, which was adopted without shareholder approval, is meant to preserve the company's deferred tax benefits, a critical asset in the housing slump. 

In a statement, the company said it plans to speak with shareholders about the reasons for withholding their votes and will consider "taking action to address the shareholders concerns."

The three directors, who ran unopposed, Debra J. Kelly-Ennis, Bernard W. Reznicek and Richard G. Wolford, must submit a letter of resignation, which the company said it will decide whether or not to accept.

Technically, the three directors remain on the board because they gained a plurality of votes, which under Michigan law, allows them to retain their seats, according to Pulte. Each director received about 49% of the votes in favor of re-election cast at the meeting on Thursday.

In 2008, only 32 directors at 17 companies out of the Russell 3,000 Index of the largest U.S. companies failed to receive majority votes, according to RiskMetrics Group.

The shareholder meeting also drew protests, partly organized by the Laborers' International Union of North America, criticizing Pulte's lending practices and working conditions. Mr. Dugas said he was open to speaking with union officials, but said the issues raised by the union so far have not been "factual."
http://online.wsj.com/article/SB124241728789024851.html