SEC Votes to Eliminate Broker Discretionary Voting

As reported on June 29, 2009, the SEC met to discuss the issue of discretionary broker voting.  On July 1, 2009, The SEC voted 3-2 to eliminate broker discretionary voting in director elections for meetings held on or after January 1, 2010.  Until now, the New York Stock Exchange (“NYSE”) had 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 new rule, which will affect most U.S. public companies, will make it more difficult for directors to be elected under a majority voting standard.  As a result, companies may need to increase their solicitation efforts to reach non-responding shareholders, which is likely to increase the costs of uncontested elections.  To review the order adopting the amendment click here.