Quality Systems Must Allow Vote on Board Independence

The Securities and Exchange Commission is requiring Quality Systems Inc.’s upcoming proxy to include a shareholder vote on the board of directors’ independence.

In its June 9 response to the Tustin health care software company, the SEC’s chief counsel office rejected half a dozen arguments Quality Systems made against the shareholder proposal submitted by Diamond A Partners L.P.

Diamond A is proposing shareholders vote on amending Quality Systems’ bylaws to require that at least 75% of the board’s directors be independent.

If the proposal passes at the company’s September annual meeting, it would also stipulate that those independent directors meet separately in executive session at the conclusion of each board meeting, and that they elect the chairman of the board, who would also be an independent director.

Quality Systems, which has been battling for months with shareholders over the independence of its board of directors, tried to exclude the vote from its proxy by citing a host of SEC rules.

The company claimed, among other reasons, that Diamond A was attempting to submit more than one proposal and that there is already a majority of independent directors on the board.

Quality Systems Chief Executive and Chairman Sheldon Razin said Tuesday that the company would comply with the SEC’s decision.