Merck Moves to Cut Board Terms

Merck & Co., the second-biggest U.S. drug maker, moved to slash the terms of its board members to one year from three, bowing to shareholder pressure.

At the company’s annual meeting next month, stockholders will vote on whether the 13 directors should face annual elections, Whitehouse Station, N.J.-based Merck said in a filing. Five incumbents are backed by the board this year.

Since 2000, a majority of Merck shareholders have supported shareholder activist Evelyn Y. Davis’ proposal, which she says would hold directors more accountable.

Last month, Lucent Technologies Inc. adopted annual board elections after Davis built shareholder support over six years. Davis said her Merck proposal won 70% of votes last year.

“I’ve been getting increasing percentages,” Davis said in a telephone interview from Washington. “Last year, they could no longer ignore the views of stockholders.”

The plan would change a system approved by stockholders in 1985 that divided the board into three groups serving staggered three-year terms. At least 80% of shareholders must vote in favor of the proposal for it to be adopted, according to the proxy.

Merck said in a filing that its board believed the staggered system helped ensure continuity but that investors wanted change.

Shares of Merck fell 39 cents to $47.28 on the New York Stock Exchange.