NYSE Ban on Broker Voting Gets a Second Chance by ProQuest


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									NYSE Ban on Broker Voting Gets a Second Chance
By Melissa Klein Aguilar                       sumably it has something to do with the       to spend more money reaching sharehold-
                                               arrival of new SEC leadership that is tak-    ers who previously didn’t vote.

I  t’s back: A proposal from the New York
   Stock Exchange to keep broker-dealers
                                               ing a more shareholder-friendly tone; the
                                               SEC must approve any NYSE rule change         Consequences
from voting in elections for corporate
board directors.
    The NYSE refiled its controversial
                                               for it to go into effect.
                                                  As currently written, the amendment
                                               would apply to proxy voting for share-
                                                                                             W      ithout broker votes in director elec-
                                                                                                    tions, companies with majority-
                                                                                             vote standards could see their lives get
proposal Feb. 26, more than two years          holder meetings held on or after Jan.         more complicated. New directors might
after the exchange first tried to pass the     1, 2010. If the SEC doesn’t approve the       have a more difficult time crossing the 51
reform against so-called “broker voting.”      amendment by Aug. 31 of this year, how-       percent threshold, and embattled incum-
Assuming the idea finally wins approv-         ever, the effective date would be delayed     bents might end up with a majority of
al—decidedly more possible under the                                                         votes against them. That would essential-
new Securities and Exchange Commis-                                                          ly force the incumbent off the board, since
sion leadership—it could give shareholder                                                    he would usually be required to tender his
activists more strength when expressing                                                      resignation.
displeasure with directors they don’t like.          “We look forward to swift                   “We don’t have a lot of experience yet
    Broker-dealers are currently allowed                                                     with how boards will deal with such ten-
to cast ballots in uncontested director
                                                 action by the SEC on this long              dered resignations,” says Claudia Allen,
elections if their clients fail to provide       overdue shareholder reform.”                chair of the corporate governance practice
voting instructions at least 10 days before                                                  in the law firm Neal Gerber & Eisenberg.
a scheduled company meeting. The NYSE                                 —Amy Borrus,               Moreover, companies that have adopted
proposal would amend Rule 452 to clas-                               Deputy Director,        the SEC’s new “e-proxy” rules (allowing
sify all director elections as “non-routine”        Council of Institutional Investors       them to post their proxy statements on-
matters, which would end the brokers’                                                        line and then tell investors to read it there)
right to vote those shares. (Contested                                                       have seen a sharp drop in retail votes. That
elections are already considered non-rou-                                                    leaves broker votes all the more influen-
tine matters that brokers cannot vote on       at least another four months and would        tial—and if they are omitted from director
absent client
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