WASHINGTON—People who feel overwhelmed by the shareholder ballots mailed
to their homes could issue standing instructions to their broker under a
proposal by U.S. businesses that is drawing fire from labor groups.
BIG BOO: In an issue
separate from individual investors' proxy rights, IBM challenged
the role of proxy adviser ISS in institutional voting.
The businesses were
responding to a request for public comment by the Securities and
Exchange Commission, which is reviewing the mechanics of shareholder
Many retail, or individual, investors
don't bother to vote on the election of directors and other issues that
require shareholder approval. All sides agree it would be good to
Businesses say one way to do so is to let
individual investors give their brokers instructions ahead of time that
could be overridden if necessary. For example, an investor could tell
his or her broker to always vote in line with management
When they vote, individual investors
typically side with management and can be a counterbalance to large
institutional investors that tend to take a case-by-case approach.
"There should be a level playing field
between institutional and retail investors to ensure that the interests
of retail investors are adequately represented," U.S. Chamber of
Commerce Vice President Tom Quaadman wrote to the SEC.
Labor unions and other institutional
investors expressed concern about the idea.
"A simplistic approach to client-directed
voting will not be able to respond to evolving corporate governance
issues that shareholders are asked to vote on," wrote Daniel F. Pedrotty,
director of the AFL-CIO's office of investment.
The Council of Institutional Investors,
which represents the largest U.S. public and private pension plans, said
that if the model were too rigid, it might fail "to fully capture
The council cited the example of a model
that forced participating shareholders to choose among always voting for
or against management, abstaining or always voting in accordance with a
The American Business Conference, which
represents about 100 midsize businesses, asked the SEC to start a pilot
program to test the model with a large brokerage firm.
"This is the only way we can think of for
the commission to demonstrate substance behind its rhetorical commitment
to raise the level of individual shareholder participation in the proxy
process," wrote John Endean, the group's president.
The public comment period on a
wide-ranging SEC report about shareholder voting ended Wednesday.
On a separate issue, businesses attacked
the role of Institutional Shareholder Services, a unit of
MSCI Inc. that advises institutional investors how to vote on
International Business Machines Corp., in
a letter to the SEC, argued that institutional investors, who are
required to vote their shares, essentially outsource the responsibility
to ISS. IBM said ISS "has no economic stake in the company and has not
made meaningful public disclosures about its voting power, conflicts of
interest or controls."
ISS spokesman Gary Hewitt said some of
the corporate comments were "inflammatory and misleading." The company,
in its letter, said it effectively manages potential conflicts and has a
rigorous process for developing policy recommendations.
to Jessica Holzer at