The debate over Nestle's governance practices will be renewed at the firm's April 6 annual meeting following investors' demands last year for improvements. In 2005, the Ethos Investment Foundation filed three shareholder proposals that included calls to separate the chairman and CEO positions, loosen shareholder proposal submission requirements, and reduce board terms from five to three years.

All three resolutions failed to carry. However, the strong showing (36 percent) of Ethos' proposal to split the top two posts prompted Nestle to take steps to shore up its governance. In August, the company sent shareholders a survey to gauge ways to improve governance practices. With responses in hand, management is now asking shareholders to vote on a proposal to amend the company's bylaws to potentially allow for governance improvements. The changes would likely take place in 2007 or thereafter.

One key improvement is expected to be the dismantling of a long-standing takeover defense that limits voting rights to just 3 percent, regardless of the size of an investor's holding, according to a March 12 report in London-based The Independent. The bylaws overhaul will allow the board to remove the defense, the article reported.

Prior to Nestle's meeting, Swiss governance observers will be focused on the efforts of dissident shareholder Special Solutions to shake up the board at SIG Holding's March 30 annual meeting. Sterling Investment Group, which controls Special Solutions and holds roughly 8.6 percent of SIG's equity, originally sought the removal of four directors, but it is now backing the removal of just one (although proposals calling for the removal of all four directors will remain on the ballot).

Sterling says it took this step in response to the company's failure to disclose the terms of potential takeover bids for the Schaffhausen-based firm. SIG management contends the company was under no obligation to detail the nature of the bids because they were non-binding. In addition, management says the bids provided no strategic rationale and failed to offer long-term benefits.