SCI board rejects Watts resignation, citing governance votes over director fitness

A board-level governance dispute at Service Corporation International (SCI) reached its conclusion on July 29, when directors unanimously voted to retain Lead Independent Director Mr. Watts after a shareholder engagement process found that opposition to his re-election was rooted in policy disagreements, not concerns about his fitness or qualifications. The company intends to seek further shareholder input in the coming months, with a disclosure of those communications planned for a later date.

The vote and what triggered the review

At SCI's 2026 annual meeting of shareholders, Mr. Watts received less than a majority of votes cast for his seat. As Lead Independent Director and Chair of the Nominating and Corporate Governance Committee, he tendered a conditional resignation under the Majority Voting Policy in Section 3.4 of the company's Corporate Governance Guidelines. That policy required the committee to weigh the offer and make a recommendation to the full board within 90 days of the certification of election results.

Proxy advisory firms ISS and Glass Lewis each recommended against Watts in his capacity as committee chair, pointing to certain governance changes the board adopted. Neither cited concerns about his fitness, qualifications, or service.

What shareholders told the committee

SCI reached out to its 25 largest institutional shareholders, a group representing more than 65% of outstanding shares. Eleven shareholders, representing over 41% of outstanding shares, accepted the invitation and engaged in one-on-one meetings led by independent director C. Park Shaper, also a committee member.

The message was direct. None of the shareholders who participated expressed concern about Watts as a director. Those who had voted against him tied their decision to specific governance changes the board adopted or proposed, describing their vote as a signal on policy. The committee characterized the sessions as constructive.

Board decision and what to watch

The committee concluded that accepting the resignation would be detrimental to the company and its shareholders, and recommended rejection. After deliberation on July 29, the board voted unanimously to turn down the offer. Watts did not participate in the committee discussions or the board vote, as required by the Majority Voting Policy.

He will continue to serve as a board member through SCI's 2027 annual meeting of shareholders, or until his earlier successor is duly elected and qualified, or until his prior death, resignation, retirement, disqualification, or other removal. The committee and board are continuing to evaluate the feedback gathered during shareholder meetings and plan to seek additional input in the coming months.