Many Nabors Shareholders Still Support Proxy Access

Want a way to keep your job despite underperformance? Work on a company board with uncontested elections! Without proxy access, there is very little shareholders can do to oust underperforming directors.

At Nabors Industries (NYSE: NBR  ) , many shareholders are fed up with this scenario, and are pushing for the right to list alternative director nominees on the company's proxy. A shareholder proposal calling for this change won 56% shareholder support last year. And while the proposal failed to pass this year, it still gained substantial shareholder support, with 46.7% of shares voting for the proposal.

Investors should also note that more shares voted for the proposal than against it, and its ultimate defeat was caused by the fact that broker non-votes and abstentions were included in the final voting tally.

Shareholder shutdown
Nabors has shown an unfortunate trend of shutting down shareholders.

For example, the board has developed compensation plans that failed to receive majority shareholder support in 2011, 2012, or 2013. And don't forget that the board further embedded its power by creating a "poison pill" plan last year without shareholder approval.

Also, Nabors failed to implement two shareholder proposals that received majority support last year, including last year's proxy access proposal. Additionally, the company tried to block the same proposal from this year's proxy, but failed to gain permission from the SEC to do so. In contrast, after taking a lot of heat for their own governance problems Chesapeake Energy  (NYSE: CHK  ) and Hewlett-Packard  (NYSE: HPQ  ) accommodated shareholder requests for proxy access.

The Foolish takeaway
Given Nabors' resistance to shareholder demands, it wouldn't surprise me if Nabors continues to resist the push for proxy access, despite the fact that it gained majority support last year, and gained substantial shareholder support this year.

On the other hand, there have been some changes to the board structure that may promote decision-making that better reflects the interests of shareholders. In April, Nabors responded to pressure from major shareholder Pamplona Capital Management to add two new independent directors to the board. However, until we can determine whether these new board members will be empowered and motivated to spark necessary changes, I believe investors should continue to be wary of the stock.

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