Proposal 4: Proposal to Declassify the Board of Directors
The Board of Directors is submitting proposed amendments to Article Twelve, Section 1(b) of our Restated Articles of Incorporation (the “Articles of Incorporation”) and Article II, Section 1(b) of our Bylaws (the “Bylaws”) to provide for the phasing out of the classified structure of our Board of Directors so that, over time, all directors will be elected annually. Currently, the Board is divided into three classes, with directors elected to staggered three-year terms. If the proposed amendments to the Articles of Incorporation and Bylaws are approved, directors will be elected to one-year terms of office starting at the 2019 Annual Meeting of Shareholders. Directors elected at the 2018 Annual Meeting of Shareholders will be elected to three-year terms expiring at the annual meeting in 2021 (except for Ms. Haussler, who is nominated to join the class of directors whose term expires in 2019). Directors currently serving terms that expire at the 2019 and 2020 Annual Meetings of Shareholders will (subject to their earlier resignation or removal) serve the remainder of their respective terms, and thereafter their successors will be elected to one-year terms. From and after the 2021 Annual Meeting of Shareholders, all directors will stand for election annually.
This proposal results from an ongoing review of corporate governance matters by the Nominating and Corporate Governance Committee (the “Committee”) and the Board. In its review, the Committee and the Board considered the advantages and disadvantages of maintaining the classified board structure in light of SCI’s current circumstances. The Committee and the Board also considered the fact that a majority of large U.S. public companies with classified boards have eliminated these structures in recent years in favor of annual director elections.
After carefully considering these factors, including consideration of advice from outside experts, the Committee recommended to the Board the phased elimination of our classified Board structure. Copies of the proposed amendments to our Articles of Incorporation and Bylaws are attached to this Proxy Statement as Annex C and Annex D, respectively. Our Board has approved the amendment to our Articles of Incorporation and recommends that shareholders adopt the amendments to our Articles of Incorporation and Bylaws by voting in favor of this proposal.
Under Article Twelve, Section 1(e) of our Articles of Incorporation and Article VII of our Bylaws, this proposal must be approved by the affirmative vote of the holders of at least four-fifths of the outstanding shares of capital stock of the Company entitled to vote thereon. Accordingly, this proposal will be approved, and the proposed amendments to the Articles of Incorporation and Bylaws adopted, upon the affirmative vote of the holders of at least four-fifths of our outstanding capital stock. Abstentions, broker non-votes and failures to vote will have the same effect of an “Against” vote on this proposal. This proposal is not conditioned upon the approval of any other proposal in this Proxy Statement. If this proposal is not approved, the Board will continue to be classified.