Staples 2006 Annual Report Download - page 25

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PROPOSAL 2 — APPROVAL OF BY-LAW AMENDMENT TO CHANGE THE VOTING STANDARD FOR
ELECTION OF DIRECTORS IN UNCONTESTED ELECTIONS FROM PLURALITY TO MAJORITY.
Our Board of Directors has determined that it is in the best interest of Staples and our stockholders to adopt a
majority vote standard in uncontested elections for directors and recommends that you vote to approve the by-law
amendment implementing this standard.
Under our by-laws, directors are currently elected by a plurality vote, that is, a director nominee who receives the
highest number of affirmative votes cast is elected, whether or not such votes constitute a majority of votes cast,
including votes withheld. Recently and increasingly, stockholders of many public companies have urged their boards
of directors to change the voting standard relating to the election of directors from a traditional plurality standard to
one that would require that a director be elected only if he or she receives a majority of the votes cast in favor of the
election. When our investors initially proposed a majority vote standard, we had concerns about implementing an
untested standard where the potential legal and other implications were not well understood. Our Board also
considered the impact of the “holdover” rule under Delaware law on companies incorporated in Delaware, such as
Staples, whether directors are elected by plurality or majority vote. Under Delaware law, if an incumbent director is
not re-elected at an annual meeting of stockholders, the incumbent director continues to serve in office as a
“holdover” director until his or her successor is elected, subject to his or her earlier death, resignation or removal.
To address our investors’ concerns within the context of the Delaware “holdover” rule, in March 2006, we
adopted changes to our Corporate Governance Guidelines to provide that any director nominee in an uncontested
election who receives more votes “withheld” than “for” will tender his or her resignation, which must then be accepted
or rejected by our Board within 90 days of its delivery. Under our by-laws, directors continue to be elected by a
plurality vote. However, under our Corporate Governance Guidelines, any director who does not receive a majority of
the votes cast must offer to resign, and our Board must determine, consistent with its fiduciary duties, whether
accepting or rejecting the resignation would be in the best interest of Staples and its stockholders. Our Board has the
ability to consider a variety of factors, including applicable legal and regulatory requirements, in making its
determination.
Our Board has continued to monitor developments in corporate governance as the practices surrounding the
majority vote standard have evolved. As the investor community has focused on this issue, the legal and other
potential consequences of adopting a majority vote standard have been reviewed more closely. A number of public
companies incorporated in Delaware have adopted some form of majority vote standard and there is now more
experience, knowledge and examples of how it can be implemented. Our Board has continued to evaluate the merits,
risks and uncertainties relating to a majority vote standard and, after careful consideration, believes it is now in the
best interest of Staples and our stockholders to strengthen the approach initially adopted by Staples by amending our
by-laws to provide for a majority vote standard.
We propose to amend our by-laws to provide that a director in an uncontested election will only be elected if he
or she receives more votes “for” than votes “against.” In a contested election, which is defined in our proposed by-law
amendment as an election where (1) a stockholder has nominated a person for election to our Board of Directors in
accordance with our advance notice by-law provision and (2) such nomination has not been withdrawn on or before
the tenth business day before we mail our notice of meeting to our stockholders, the voting standard would continue
to be a plurality of votes cast. The text of the proposed by-law amendment is attached as Appendix A to this proxy
statement, with deletions indicated by strikethroughs and additions indicated by underlining.
If this proposal is approved by our stockholders, conforming changes to our Corporate Governance Guidelines
previously approved by our Board will also become effective. Our Corporate Governance Guidelines, as revised, will
provide that an incumbent director who does not receive more votes “for” than “against” in an uncontested election
of directors will promptly offer to tender his or her resignation. Our Board would then need to decide whether to
accept or reject the resignation in a process similar to the one our Board currently uses pursuant to the existing
director resignation policy. Also, if this proposal is approved by our stockholders, Board approved amendments to the
advance notice provisions of our by-laws that are designed to address certain procedural and timing matters relating to
the adoption of a majority vote standard will become effective.