Today, in a letter to SEC Chairman Christopher Cox, the CtW Investment Group urged prompt approval of a longstanding NYSE proposal to eliminate uninstructed broker votes in all director elections. CtW pointed to WaMu’s annual meeting on Tuesday, where Director-nominees James Stever and Charles Lillis failed to garner majority shareholder votes, yet will be seated because broker votes were counted towards their totals.
“With rising levels of shareholder opposition to directors in uncontested elections, it is essential that the SEC eliminate broker votes before shareholders are disenfranchised yet again,” said CtW Investment Group Executive Director William Patterson. “Nearly eighteen months after the NYSE proposal was submitted, we cannot understand why the SEC has not even put it out for public comment.”
Last year, calls for the SEC to act on the 2006 NYSE proposal increased after CVS/Caremark Director Roger Headrick was re-elected only because of broker votes (Mr. Headrick later resigned).
Since most brokers support management as a matter of policy, their ability to exercise discretion over certain uninstructed client shares has been criticized as “legalized ballot stuffing” by parties who don’t share investors’ economic interests.
For more information on the broker vote issue, check out a piece in the Wall Street Journal by Kara Scannell ['Broker Votes': Opponents May Win One," WSJ, 6/13/07, no link].
In the piece, Scannell examines the controversy surrounding broker votes:
"Complaints about the system go back for years. In 2003, the proxy advisory firm Institutional Shareholder Services said that the system was hurting investors' ability to express dissatisfaction. At Tyco International Ltd. and Sprint, now Sprint Nextel Corp., ISS said, unhappiness with the companies' boards was "watered down by broker votes."
"Already, NYSE Euronext's New York Stock Exchange has proposed amending the broker-vote rule. It would redefine director elections as "non routine," no longer allowing brokers to vote shares without instruction. At the same time, the Securities and Exchange Commission is reviewing the entire voting system, from allowing companies to send proxies to shareholders over the Internet to allowing shareholders to nominate their own directors on corporate ballots. The NYSE rule change would require SEC approval."
Posted byon April 17, 2008 9:50 AM