Big Lots 2008 Annual Report Download - page 64

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We believe our majority vote policy effectively addresses the proponent’s concerns by ensuring that our
shareholders continue to have a meaningful role in director elections, while preserving the ability of the Board
to act in the best interests of Big Lots and our shareholders by considering all relevant factors and exercising its
independent judgment on a case-by-case basis. In addition, our response to the shareholder proposal is consistent
with the approach taken by other public companies, including Kellogg Company, The Sherwin-Williams Company,
Kohl’s Corporation, Caterpillar Inc. and PACCAR Inc. Shareholders at those companies, which had majority vote
policies similar to our policy, rejected shareholder proposals requesting the adoption of a majority vote standard.
We Have a History of Electing Highly Qualified Directors by a Substantial Majority
The Nominating/Corporate Governance Committee, which is comprised entirely of independent directors,
applies a rigorous set of criteria in identifying director nominees who it believes will best serve the interests of
Big Lots and our shareholders. In addition, the Nominating/Corporate Governance Committee has established
procedures to consider and evaluate persons recommended by our shareholders. As a result of these practices, our
shareholders have consistently elected, by a plurality, highly qualified directors, substantially all of whom have
been independent within standards adopted by the NYSE.
The proponent asserts that under the plurality voting standard a nominee can be elected with “as little as a single
affirmative vote, even if a substantial majority of the votes cast are ‘withheld’ from the nominee.” However, that
remote, theoretical possibility does not accurately reflect the actual results we have experienced using the plurality
voting standard. Under the plurality voting standard, our shareholders consistently have supported to a significant
degree our director nominees. For example, in the last three years, our director nominees have, on average,
received from our shareholders the affirmative vote of 95% of the votes cast in director elections, and no director
nominee has received fewer than 86% of the votes cast. Therefore, it is not likely that the amendment to our articles
of incorporation advanced by the proponent would change the results of an election of our directors.
We Have Strong Corporate Governance Practices
Our strong corporate governance practices have been recognized by RiskMetrics Group (parent company of
Institutional Shareholder Services, Inc. (ISS)). According to its March 10, 2009 rankings, RiskMetrics ranked us
first in the retail industry and second among the S&P 500 (outperforming 99.8% of the companies in the S&P 500),
as measured by the RiskMetrics Group Corporate Governance Quotient (CGQ).
The Shareholder Proposal May Adversely Impact Us
Implementing the majority voting standard in our articles of incorporation could have unintended adverse
consequences for us. For example, as an NYSE listed company, we must comply with listing standards that include
requirements for maintaining independent directors and directors with particular qualifications. The Nominating/
Corporate Governance Committee and the Board consider these requirements when selecting director nominees.
The majority voting standard could result in the failure to elect the requisite number of independent directors or
directors with the requisite qualifications, which would, in turn, violate the applicable NYSE listing standards
and/or federal securities laws. Similarly, the majority voting standard could leave the Board with an insufficient
number of directors to conduct business or perform its duties. By contrast, the plurality voting standard promotes
stability in our governance processes by ensuring that a full slate of directors is elected at each annual meeting
of shareholders and that we can remain in compliance with the applicable NYSE listing standards and federal
securities laws.
The Shareholder Proposal Creates Uncertainty
Plurality voting has long been the accepted voting standard among large public companies for the election of
directors. Consequently, the rules governing plurality voting are well established and understood. In contrast
to our majority vote policy, the majority voting standard advanced by the proponent creates uncertainty and
involves potential issues for which there is little precedent. For example, under Ohio law, an incumbent director
who is not re-elected is considered a hold-over director and continues to serve until his or her successor is elected
and qualified or until his earlier resignation, removal from office or death. Therefore, even if our articles of
incorporation are amended as suggested by the proponent, such an amendment would not give us the authority to
force a director who failed to receive a majority vote to leave the Board before his or her successor is elected at a