Preparing for End of Broker Voting in Elections by ProQuest

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Preparing for End of Broker Voting in Elections
By Jaclyn Jaeger                                Don’t discount the old-fashioned tele-          a letter to shareholders in a Form 8-K are all
                                                phone; such solicitation calls to larger re-    ways to achieve this, she said.

T    he elimination of broker votes in direc-
     tor elections may well tip the scales of
power from corporate boards to sharehold-
                                                tail investors can be a useful tactic to drum
                                                up votes. Generally, telephone campaigns
                                                encourage shareholders to vote and direct
                                                                                                    What Now?
                                                                                                    The exact effect that the rule change will
                                                                                                have will vary from company to company
ers. Companies should prepare now so they       the shareholder to record votes by phone,       depending on numerous factors, such as the
won’t be left dizzy by the rule change.         she said. “While call campaigns may not by      composition of a company’s shareholder
    The Securities and Exchange Commis-         themselves result in a huge turnout, they       base. For example, Finkelstein said, com-
sion ended the practice of “broker voting”      can provide that swing vote that results in     panies should know what percentage of
in director elections this summer, a move                                                       their shareholders are institutional or retail
that may prove to be the most important de-                                                     investors, and which institutions have long-
velopment in shareholder activism in more                                                       or short-term investment strategies.
than a decade, Rachel Posner, general coun-                                                         Experts cited several other key factors to
sel at proxy solicitation firm Georgeson,                “The increased risk for a              watch, including:
said in recent Webcast on the topic.                failed director election in the             »     Historical voting patterns and share-
    Historically, broker-dealers were al-                                                             holder participation;
lowed to vote as they saw fit in uncontested            wake of the elimination of
director elections when clients hadn’t pro-           the broker vote, particularly             »    Agenda items likely to be addressed
vided the firms with any instructions—and                                                            in future annual meetings, and how
typically the firms then rubber-stamped              for a company with majority                     those proposals may affect the ability
whatever management recommended.                      voting in place, is obvious.“                  to achieve quorum to conduct business
Now, starting Jan. 1, such votes are prohib-                                                         of the meeting;
ited, leaving shareholder activists that much
                                                                      — Rachel Posner,
more influential.                                                                               »    The likelihood of brokers adopting
                                                                      General Counsel,
    “The increased risk for a failed director                              Georgeson                 “client-directed” voting, where the cli-
election in the wake of the elimination of                                                           ent gives standing instructions on the
the broker vote, particularly for a company                                                          broker on how to vote in director elec-
with majority voting in place, is obvious,”                                                          tions and other issues;
Posner said during the Oct. 15 Webcast.         the successful director election, even in a
“The results are staggering.” In 2008, for      close vote.”                                    »    The corporate governance profile of
example, 16.5 percent of shares were voted         Posner also urged companies to alert              the company, especially as it pertains
by brokers exercising discretionary voting,     shareholders to the rule change itself—per-          to shareholder activism or the chance
according to Broadridge Financial Solu-         haps with catchy reminders in proxy pack-            th
								
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