SEC moves to block broker votes

The US Securities and Exchange Commission (SEC) has moved a step closer to approving the New York Stock Exchange’s Rule 452 proposal to eliminate broker discretionary voting in director elections.  This proposal was developed by the Exchange’s Proxy Working Group in 2006.

The NYSE has recently re-filed its proposed amendment to Rule 452 and includes the reports of the Proxy Working Group and the comment letters it received on its work.

It has been estimated that broker votes can give management-supported director elections an automatic 20% to 30% of share of the vote.  Although some US companies have already moved to majority voting  from plurality voting, (getting just one more vote than another candidate for the seat is enough to win) banning broker votes will have little effect in plurality contests.

Bearing in mind current market conditions and the Obama administration’s commitment to reform, the SEC is likely to move quickly on this proposal. Once the SEC publishes the proposed NYSE Rule amendment, there will be a 21-day comment period.

Niels Holch commenting on behalf of  The Shareholder Communication Coalition said: “broker discretionary voting is so interrelated with other proxy process issues that the SEC should be conducting a comprehensive review of all shareholder voting and communications issues, instead of trying to reform the proxy system in a piecemeal fashion. ”

Piecemeal or not, the US is making major and very welcome moves in proxy reform.

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