SEC to Decide on Broker Discretionary Voting

On July 1, 2009, the SEC will hold a Sunshine Act Meeting at which it will consider the issue of instructed broker voting.  The New York Stock Exchange (“NYSE”) has long classified uncontested director elections under Rule 452 as a “routine matter,” giving brokers the discretion to vote shares held in investors’ accounts when they do not receive voting instructions from the beneficial owner within ten days of a company’s meeting.  The NYSE first proposed an amendment to NYSE Rule 452 in October 2006.  The NYSE proposal would re-classify director elections as a non-routine matter on which NYSE member organizations are not permitted to vote—regardless of which exchange the company is listed on—without instructions from the beneficial owner.  Brokers would no longer be able to vote uninstructed shares, effectively reducing the number of votes in favor of board-nominated directors.  If adopted, this amendment is expected to make it more difficult for companies with “majority voting” provisions to achieve successful elections.  Companies may need to increase their solicitation efforts to reach non-responding shareholders, which is likely to increase the costs of uncontested elections.  At least three of the five SEC commissioners have stated publicly that they support the change.  Click here to review a copy of the proposed rule.