Sleep Number Corp

The proposal asks shareholders to approve amendments to the Company’s Articles and Bylaws to declassify the Board, converting the current classified (staggered) three-class structure with three-year terms into an annual election system where all directors will be elected to one-year terms beginning with the 2027 Annual Meeting contingent on passage. Management seeks shareholder approval to accelerate board declassification—previously near-successful votes fell short of the two-thirds of outstanding shares required—and notes that directors elected to terms expiring after 2027 have agreed to shorten their terms and resign effective as of the 2027 Annual Meeting to allow annual elections. The board frames this as responsive to shareholder feedback and consistent with evolving governance norms favoring annual elections to increase director accountability and reduce defenses against takeover attempts. The board unanimously recommends a “For” vote, describing the change as in the best interests of the company and shareholders; resubmission follows strong prior shareholder support (approx. 98-99% of votes cast) that nonetheless failed to meet the higher outstanding-share threshold. For analysts, key considerations include the governance trade-off: declassification increases director accountability and potential shareholder influence over board composition but removes a layer of continuity and potential protection against transient activist pressures. The vote requires a two-thirds affirmative vote of shares outstanding, which is a high hurdle; thus success depends on mobilizing holders who did not vote previously. If approved, the company will file amended and restated Articles and conforming bylaw revisions, and directors elected in future years will serve one-year terms, aligning with current best practice and potentially impacting takeover dynamics and board turnover risk.

This management proposal seeks shareholder approval to amend Article XIV to remove the two-thirds supermajority voting requirement for amendments related to director matters (number, classification, term, removal, filling vacancies) and replace it with a standard majority vote. Management argues this aligns with shareholder feedback and contemporary governance practices favoring majority rule to increase board flexibility and responsiveness. The board unanimously recommends a “For” vote and has adopted resolutions declaring the amendment advisable. For analysts, the proposal reduces structural barriers to governance changes, simplifies amendment of director-related provisions, and may lower the threshold for future corporate governance reforms. However, lower thresholds can also make governance more susceptible to short-term influence; investors should weigh trade-offs between governance agility and protections against opportunistic changes. The proposal must pass by a two-thirds affirmative vote of shares outstanding (despite seeking to remove the supermajority requirement), so management is again asking for a supermajority to remove a supermajority, reflecting Minnesota law and existing charter provisions; success will depend on mobilizing sufficient outstanding shares to reach the high threshold.

Management proposes to eliminate the two-thirds supermajority voting threshold in Article XV, which currently applies to certain fundamental transactions such as mergers, asset sales, or issuance of stock in exchange for assets. Management frames this as a governance modernization step, aligning the company with common practice where a simple majority of votes cast controls routine corporate decisions, increasing board flexibility and reducing the risk of minority holdouts blocking strategic transactions. The board recommends a “For” vote, arguing the change is in the company and shareholders’ best interests. For analysts, this reduces structural transaction friction and may make the company more agile in executing strategic deals, but it also reduces shareholder protections against potentially change-of-control transactions without broad shareholder consent. Notably, approval of this amendment itself requires a two-thirds affirmative vote of shares outstanding, so passage will again depend on securing substantial shareholder support.

This non-binding management-sponsored advisory proposal asks shareholders to approve the Company’s executive compensation as disclosed in the CD&A and related tables. Management emphasizes that compensation is structured to align executives’ interests with shareholder interests, is predominantly performance-based and at-risk, and ties pay to financial and TSR metrics. The board recommends a “For” vote and will consider the results in future decisions. For analysts, the advisory nature means it does not directly change pay, but a low support level could trigger shareholder engagement and governance changes; historical support was 77.63% in 2025, below the company’s five-year average, prompting engagement and program adjustments.

Management requests approval to increase the share reserve under the 2020 Plan by 750,000 shares to replenish capacity for equity grants, citing prolonged stock price decline that led to constrained share availability even after conservation measures (limiting PSUs, eliminating options, limiting grants to non-employee directors). The Board argues that equity awards are critical for retention and alignment and that without share capacity the company might need to use cash awards, which could impair financial flexibility and reduce alignment with shareholders. The amendment includes governance protections (no evergreen, no repricing without shareholder approval, double-trigger change-in-control, limits on director awards, clawback features). The Board recommends a “For” vote, and approval requires a majority of votes cast.