Pep Boys 2009 Annual Report Download - page 42

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(Item 4) SHAREHOLDER PROPOSAL REGARDING THE VOTE REQUIRED TO AMEND OUR BYLAWS
Richard R. Treumann, 590 Plutarch Road, Highland, NY 12528, holder of 200 shares of Pep Boys Stock, has
notified us that he intends to introduce the following resolution at the meeting:
Adopt Simple Majority Vote
Resolved: Shareholders request that our Board take the steps necessary so that each shareholder voting
requirement in our charter and bylaws, that calls for a greater than simple majority vote, be changed to a majority of
the votes cast for and against the proposal in compliance with applicable laws. This includes our current 80% vote
requirement.
Statement of Richard R. Treumann
Currently a 1%-minority can frustrate the will of our 79%-shareholder majority. Also our supermajority vote
requirements can be almost impossible to obtain when one considers abstentions and broker non-votes.
Supermajority requirements are arguably most often used to block initiatives supported by shareowners but opposed
by management. For example, a Goodyear (GT) management proposal for annual election of each director failed to
pass even though 90% of votes cast were yes-votes.
This proposal topic won from 74% to 88% support at the following companies in 2009: Weyerhaeuser (WY),
Alcoa (AA), Waste Management (WM), Goldman Sachs (GS), First Energy (FE), McGraw-Hill (McP) and Macy’s
(M). The Council of Institutional Investors www.cii.org recommends that management adopt shareholder proposals
after receiving their first majority vote.
Please encourage our Board to respond positively to this proposal: Adopt Simple Majority Vote
PEP BOYS’ STATEMENT IN OPPOSITION TO THE FOREGOING SHAREHOLDER PROPOSAL
Pep Boys’ charter and bylaws already call for simple majority voting whenever corporate action is to be taken by
vote of our shareholders. Simple majority voting refers to the requirement to obtain a majority of the votes cast on a
particular matter, as opposed to a majority of the votes entitled to be cast.
The only shareholder voting requirement contained in our charter concerns the election of directors, which is
determined by a simple majority vote. Section 7 of our charter provides that in uncontested elections of directors “to
be elected a nominee must receive the affirmative vote of a majority of the votes cast with respect to the election of
that nominee.” In contested elections, where the number of directors nominated exceeds the number of directors to
be elected, those nominees receiving the most votes are elected.
Section 2-5(b) of our bylaws similarly provides for simple majority voting. It reads “whenever corporate action
is to be taken by vote of the shareholders of the Corporation at a duly organized meeting of shareholders, it shall be
authorized by a majority of the votes cast at the meeting by the holders of shares entitled to vote thereon.”
The only voting provision contained in our bylaws that applies a standard other than simple majority voting
concerns the amendment of our bylaws themselves. In order to amend our bylaws, the vote of at least a majority of
the votes entitled to be cast is required. This provision is designed to ensure that at least a majority of all of our
shareholders agree on a proposed bylaw provision. If a simple majority standard was applied, as few as 26% of our
shareholders could mandate a change to one of our primary governing documents, potentially without the support of
up to 74% of our shareholders. The Board does not believe that adopting such a provision would be in the best
interest of all or even a majority of our shareholders.
With respect to the 80% voting standard referenced by Mr. Treumann, our bylaws provide a heightened (80%)
voting standard to amend or repeal those provisions of our bylaws that provide indemnification protection to our
officers and directors. Such indemnification protection is provided through our bylaws to the full extent permitted