Amendments to ‘Broker Voting Rule’ yield unexpected results
The long-awaited change to NYSE Rule 452, effective Jan. 1, 2010, reclassifying uncontested director elections as ‘non-routine’ items, thereby eliminating the discretion of brokers to vote uninstructed shares, also makes it more difficult for companies with no routine matters on the ballot to achieve a quorum. Under the new rule, which applies to listings on all three major domestic exchanges, if there are no routine voting items on the proxy, brokers will not vote uninstructed shares and such shares will not be treated as present for quorum purposes. A number of law firms advising corporate issuers recommended as a solution that companies holding otherwise routine meetings include a proposal to ratify the appointment of auditors – a proposal considered routine – to ensure that broker votes count towards the quorum.
It appears companies took note: The ratification of auditors appears on the ballots for 94% of meetings so far this year (through Feb. 28, 2010). This compares with just 80% of meetings occurring during the same time period a year prior (similarly, for the full 2009 year auditor ratification proposals were voted on at approximately 80% of all U.S. meetings). This is likely good news for some institutional shareholders, who have encouraged (through engagement, proxy voting policies, and/or petitioning the SROs) all companies to allow shareholders an opportunity to register their opinion on the choice of auditors.
For further information please contact Allie Monaco, Head of Research at ProxyGovernance.