News Column

Change afoot at U.S. Steel

February 3, 2014

By Timothy Puko, The Pittsburgh Tribune-Review

Feb. 04 -- U.S. Steel Corp. is moving to limit the terms of its board members after three years of pressure from shareholders, who want more accountability amid a prolonged slump in its earnings and stock price. The company, which has not turned a profit in five years, announced on Monday that it will ask shareholders at its annual meeting on April 29 to vote on a plan that would require its entire board to stand for re-election annually. U.S. Steel has a staggered board, in which a third of its members come up for election annually for three-year terms. Staggered board terms insulate a company from hostile takeovers or from major changes by dissident shareholders, but they have been falling out of favor with investors. Critics say such boards are less accountable to shareholders because directors become too cozy with each other and may put the interests of management first. Board members who stand for election annually are under pressure to increase the company's value or risk being ousted after a year. The U.S. Steel board twice had opposed such a move when shareholders recommended putting it to a non-binding vote. It decided to put the plan to a vote this year after hearing broad support from shareholders and institutional investors, spokeswoman Courtney Boone said. An annual re-election for every board member should put more pressure on members to improve U.S. Steel's performance, said Charles Bradford , president of Bradford Research Inc. in New York . He criticized the board for failing to make tough decisions on management as the company lost money year after year and its stock struggled. "This board has been absent without leave for the last several years when this company has fallen into great difficulty," said Bradford, who follows the steel industry. "It makes no sense and that's the board's fault." Longtime chief executive John P. Surma announced his retirement last year and was replaced by Mario Longhi , the company's president. Longhi has been taking steps to improve the company's performance. He permanently closed a steelmaking plant in Canada , two older coke batteries in Gary, Ind. , and other operations to save $75 million annually. The company lost more than $2 billion in 2013 alone. For 113 years, nearly its entire history, U.S. Steel has had a board divided into three classes with staggered re-election. The system had a history of effectiveness and protected the company against any hostile buyers. "A classified Board structure increases the Board's ability to evaluate the fairness of any offer, to protect shareholders from abusive or coercive offers, and, where appropriate, to negotiate on behalf of our shareholders; it does not preclude a successful takeover," the company said, advising against moving from a staggered board in its 2013 proxy statement. Of S&P 500 companies, 70 percent now have annual elections for every board member, up 20 percentage points from 2009, according to ISS Governance QuickScore Data. Boone said U.S. Steel asked institutional investors in meetings this year about moving away from a staggered board and they "widely encouraged" it. More than 80 percent of voting shareholders supported non-binding proposals for a change in both 2012 and 2013, she added. "Such a change would enable shareholders to register their views on the performance of all directors at each annual meeting," said Janet Cowell , the treasurer of the state of North Carolina , which proposed the move. If U.S. Steel shareholders approve the change, directors elected this year would be the last to get three-year terms, allowing the new system and one-year terms to be fully implemented on the board by 2017. Staff writer Alex Nixon contributed. Timothy Puko is a Trib Total Media staff writer. Reach him at . ___ (c)2014 The Pittsburgh Tribune-Review (Greensburg, Pa.) Visit The Pittsburgh Tribune-Review (Greensburg, Pa.) at Distributed by MCT Information Services

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Source: Pittsburgh Tribune-Review (PA)

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