Denver investor wins the day with Commerce shareholder vote

Gerald Armstrong has won again, pushing another Kansas City banking company toward annual elections of all directors.

This time the 73-year-old Denver resident targeted Commerce Bancshares Inc., whose shareholders approved his proposal at their annual meeting last week. Four years ago it was UMB Financial Corp.

Both times, shareholders voted to break up their company’s staggered election of directors. Historically, each company gave directors three-year terms, and staggered them so only one third of the board stood for election at each annual meeting.

Commerce’s vote, reported Monday in a filing with the Securities and Exchange Commission, tallied yes on Armstrong’s proposal from 62.9 percent of ballots cast.

Consider it success on the fourth ballot. Armstrong had failed to win support for his recurring proposals at the company’s shareholders meetings in 2009, 2010 and 2012.

“I’m determined on some of these things,” Armstrong said Monday. “I’m the only one who took them to task in the past.”

Armstrong said he became a shareholder rights advocate in the late 1960s focusing on companies in Colorado. His eye has found others – including Commerce and UMB – as his investment portfolio grew.

UMB changed its board elections the next year and all members of its board stand for election annually.

The vote by Commerce shareholders was non-binding, but Armstrong said he expects the company to follow through on changing to annual elections of directors. Company officials were not available.

Armstrong said he has owned Commerce shares since December 2002, and he likes the stock still. He said the company’s board of directors will be more accountable to owners if they face re-election each year.

Commerce, in presenting the vote to shareholders, opposed Armstrong’s proposal. Allowing directors to remain on the board for three years provides continuity in the company’s leadership, Commerce management said. It said this is especially valuable in the “complex and high regulated” banking world.

Corporate plans and initiatives often require years to implement. Annual elections “would be disruptive to consistent corporate planning and the long term stability of the company,” it said.

Staggered boards had developed in the corporate world partly to help thwart hostile takeovers. Unwanted suitors, no matter how many votes of support they could muster, would be able to displace only a third of the board in any one year. Others have attacked the defense as helping to shield management from dissident voices or unhappy shareholders.

“A staggered board can entrench management and effectively preclude most takeover bids or proxy contests,” said an ISS Proxy Advisory Services report on the Commerce proposal.

It forces dissidents and those planning to bid for control of a company to negotiate terms with the existing board, the ISS report said.

Commerce management, in the proxy statement to shareholders, said this was a reason to keep the board elections staggered.

Armstrong said the proposal nearly passed last year and has become more popular among institutional investors, such as mutual funds and pensions.

Next up for Armstrong, another run at UMB Financial. He wants the company to separate the chairman and chief executive officer jobs, both of which are held by J. Mariner Kemper.

Shareholders rejected that proposal at last year’s meeting and will weigh in again at their April 28 annual meeting.

This story was originally published April 20, 2015 at 2:45 PM with the headline "Denver investor wins the day with Commerce shareholder vote."