Omnicom shareholders, disregarding a recommendation from management to vote down the proposal, passed a resolution at its annual meeting last week that will require the chairman of the board to be an independent board member.
The policy change would require an amendment of the corporation’s bylaws, and allows for the change to be phased in with the next CEO transition. Compliance with the new policy would be waived, according to the proposal, “if no independent director is available and willing to serve as Chair.”
Currently, Bruce Crawford, 86, former CEO of the company, serves as board chairman. Given his history with the company, he is not considered to be an independent board member. Crawford was succeeded as CEO by John Wren, 62, in 1997. Wren also holds the title of president.
The resolution won by about 18 million voted shares with about 110.5 million votes cast in favor and 92.5 million opposed.
The resolution asserted that an independent board chair would help to avoid conflicts of interest between the board and company management.
“Shareholders are best served by any independent Board Chair who can provide a balance of power between the CEO and the Board empowering strong Board leadership,” the proposal stated. “The primary duty of a Board of Directors is to oversee the management of a company on behalf of shareholders. A combined CEO/Chair creates a potential conflict of interest, resulting in excessive management influence on the Board and weaker oversight of management. Numerous institutional investors recommend separation of these two roles.”
The company had argued that the resolution wasn’t necessary.
“The Company’s current leadership structure is in the best interests of its shareholders,” Omnicom stated, while urging shareholders to vote down the resolution. “Omnicom has always strived to maintain high corporate governance standards. The Company has maintained a separate Chairman and CEO since 1997, and we treat those positions as separate and distinct. We have carefully considered and approved our current leadership structure, and we firmly believe that this structure is appropriate and in the best interests of the Company and its shareholders.”
Separately, shareholders voted down a proposal from the New York City Comptroller’s Office that sought the adoption of a policy requiring Omnicom to disclose its EEO-1 data — a comprehensive breakdown of its workforce by race and gender according to 10 employment categories. The comptroller’s office has made similar proposals in past years and shareholders declined to approve.
Shareholder discontent with the "inside" nature of the Omnicom board is a significant development. Lots of activist behavior also with IPG and WPP shareholders. For the marketing holding companies, this signals a change in corporate governance.