Saturday, October 28, 2006
NYSE moves to eliminate broker vote for directors in 2008
NYSE moves to eliminate broker vote for directors in 2008
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Director elections no longer 'routine' proposals
October 25, 2006
NEW YORK -- The NYSE moved today to bar brokerage firms from voting in director elections in the absence of proxy instructions from shareholder customers. The proposed rule change means companies may not be able to rely on large blocs of favorable broker votes supporting their chosen candidates.
The rule change requires SEC approval. If passed, the reform of NYSE Rule 452, would apply for all shareholder meetings starting in January 2008.
NYSE Rule 452 allows brokers to vote on certain 'routine' proposals if the beneficial owner of the stock has not provided voting instructions at least ten days before a meeting. Shareholder activists have long been pushing for director elections to be considered non-routine. An NYSE proxy working group, led by Larry Sonsini of Wilson Sonsini Goodrich and Rosati, agreed, recommending changes last May after more than a year of study.
'The election of directors is simply too important to ever be considered routine, even where the election is uncontested,' says NYSE president and co-COO Catherine Kinney. 'Shareholder voting on the election of directors is a critical component of good corporate governance.'
Beth Young, an analyst with watchdog group the Corporate Library, welcomes the change, though she had hoped it would be in place by the 2007 season.
Election outcomes may be less management-driven in the future, although 'it's a very company-specific question,' she says. 'Some companies have a large amount of broker voting and others don't.'
Companies with large numbers of retail investors could see the most change. Young cites the case of Disney, which saw Michael Eisner propelled to the board in 2004 with broker votes despite 45 percent of shareholders withholding their votes in protest of his candidacy.
'At a company like that, we will see a shift in power,' Young says.
The other side of the Street
John Endean, president of the American Business Conference, a Washington-based coalition of CEOs of midsize companies, doesn't like the rule change, arguing that it will increase time and money spent on director elections.
The 'vast majority' of unreturned proxies are sent to shareholders who support management's proposals on directors, he says. 'The net effect of the NYSE proposal will be to require companies to validate this. The only real beneficiary of such a result will be proxy solicitation firms and mail houses.'
Endean says the NYSE 'shrugged off' his suggested reforms of broker voting such as proportional voting of uninstructed shares. He observes also that the proxy working group lacked a natural constituency of avid supporters of the broker vote.
'Because smaller issuers with significant numbers of individual shareholders on the street side were not included in the working group's membership, they got the short end of the stick,' he says.
by Anna Snider
« Back
Director elections no longer 'routine' proposals
October 25, 2006
NEW YORK -- The NYSE moved today to bar brokerage firms from voting in director elections in the absence of proxy instructions from shareholder customers. The proposed rule change means companies may not be able to rely on large blocs of favorable broker votes supporting their chosen candidates.
The rule change requires SEC approval. If passed, the reform of NYSE Rule 452, would apply for all shareholder meetings starting in January 2008.
NYSE Rule 452 allows brokers to vote on certain 'routine' proposals if the beneficial owner of the stock has not provided voting instructions at least ten days before a meeting. Shareholder activists have long been pushing for director elections to be considered non-routine. An NYSE proxy working group, led by Larry Sonsini of Wilson Sonsini Goodrich and Rosati, agreed, recommending changes last May after more than a year of study.
'The election of directors is simply too important to ever be considered routine, even where the election is uncontested,' says NYSE president and co-COO Catherine Kinney. 'Shareholder voting on the election of directors is a critical component of good corporate governance.'
Beth Young, an analyst with watchdog group the Corporate Library, welcomes the change, though she had hoped it would be in place by the 2007 season.
Election outcomes may be less management-driven in the future, although 'it's a very company-specific question,' she says. 'Some companies have a large amount of broker voting and others don't.'
Companies with large numbers of retail investors could see the most change. Young cites the case of Disney, which saw Michael Eisner propelled to the board in 2004 with broker votes despite 45 percent of shareholders withholding their votes in protest of his candidacy.
'At a company like that, we will see a shift in power,' Young says.
The other side of the Street
John Endean, president of the American Business Conference, a Washington-based coalition of CEOs of midsize companies, doesn't like the rule change, arguing that it will increase time and money spent on director elections.
The 'vast majority' of unreturned proxies are sent to shareholders who support management's proposals on directors, he says. 'The net effect of the NYSE proposal will be to require companies to validate this. The only real beneficiary of such a result will be proxy solicitation firms and mail houses.'
Endean says the NYSE 'shrugged off' his suggested reforms of broker voting such as proportional voting of uninstructed shares. He observes also that the proxy working group lacked a natural constituency of avid supporters of the broker vote.
'Because smaller issuers with significant numbers of individual shareholders on the street side were not included in the working group's membership, they got the short end of the stick,' he says.
by Anna Snider
