The answer is, it depends. In the end, votes on any director nominees must be made on a case-by-case basis. But whenever there is a question, shareholders have a simple, but oft-neglected, tool at their disposal: informing the corporation of their concerns and desires. A positive response to an inquiry is a good sign that the board is attuned to shareholder interests. A deaf ear would suggest that a more aggressive approach may be necessary.

Since the board of directors is the fulcrum of corporate accountability, it follows that votes on director nominees are the single most important use of the shareholder franchise. The point is underscored by recent trends in proxy voting and shareholder activism. As shareholder attention focuses more on the board of directors, it is natural that certain nominees, by virtue of having served as the CEO of the corporation, deserve great scrutiny. Retired CEOs bring with them a knowledge of the company, personnel, and industry that is hard to match. On the other hand, those very advantages could limit the new CEO's efficacy or could force the retired CEO to be an ineffective director. In short, it is a catch-22 for both the retired CEO and for shareholders.

We thus have four policy recommendations:

- Shareholder votes on director nominees who are retired CEOs of the corporation must be made with great care.

- Shareholders should consider withholding their votes for retired CEOs unless special circumstances exist.

- Shareholders also should recognize that the new CEO may want to retain the retired CEO as a personal consultant.

- Shareholders should communicate their desires and concerns to the board on a ongoing basis.

Howard Sherman is Senior Vice President of Institutional Shareholder Services Inc., the Washington, D.C.-based proxy voting and corporate governance advisory firm. He is also Director of the firm's Global Proxy Services.