Pfizer Makes It Harder to Elect New Directors to Its Board

Last Updated Jan 6, 2010 6:02 AM EST

Pfizer (PFE) made changes to its by-laws that make it slightly more inconvenient for unhappy shareholders to nominate new directors to the board or to make proposals for shareholder votes. The new regs were disclosed in an SEC filing in mid December.

The new regs require 90 days' notice (instead of 60 days) for director nominations and vote proposals. A Pfizer spokesperson told BNET:

The amendment [cited] ... brings Pfizer's by-laws more in line with best practices.
While the new by-laws aren't terribly onerous, and lots of companies have similar ones, they do mean that if any unhappy investor -- say a hedge fund or private equity fund, or someone like Carl Icahn -- wanted to force their own directors onto Pfizer's board, they now need to provide Pfizer with notice that is the equivalent of at least one financial quarter. That's a long time in shareholder-land, and would give an embattled management an extra month in which to hire lawyers, proxy agencies or pr counsel with which to fight dissident investors.

Here are the details of the difference between the new by-laws as amended, and the by-laws Pfizer used in October 2008.

When nominating new directors to the board, the old bylaws said: [Directors must be nominated] by the close of business 60 days in advance of the anniversary of the previous year's annual meeting if such meeting is to be held on a day which is within 30 days preceding the anniversary of the previous year's annual meeting or 90 days in advance of the anniversary of the previous year's annual meeting if such meeting is to be held on or after the anniversary of the previous year's annual meeting; ...
The new by-laws say:
To be timely, such notice must be received by the Secretary (1) with respect to an annual meeting of stockholders, not less than 90 days nor more than 120 days in advance of the anniversary of the previous year's annual meeting; ...
When proposing issues for stockholders to vote on, the old by-laws said:
To be timely, a Proponent's notice must be delivered to or mailed and received at the principal executive offices of the Corporation: (1) by the close of business 60 days in advance of the anniversary of the previous year's annual meeting if such meeting is to be held on a day which is within 30 days preceding the anniversary of the previous year's annual meeting or 90 days in advance of the anniversary of the previous year's annual meeting if such meeting is to be held on or after the anniversary of the previous year's annual meeting
The new by-laws say:
To be timely, a Proponent's notice must be delivered to or mailed and received by the Secretary at the principal executive offices of the Corporation not less than 90 days nor more than 120 days in advance of the anniversary of the previous year's annual meeting ...
Why might Pfizer want more advance notice of shareholder mutinies? Its stock was up 2 percent for 2009 through Dec. 28, despite the Wyeth acquisition depressing its price. But the S&P 500 rose 21 percent over the same period. Perhaps the company feels some investors think it could have done better.