proxy vote site favors boards, critics say
| Tue May 29, 2012 12:29pm EDT
Public companies are increasingly using the Internet to collect proxy votes.
But shareholder activists say shortcuts within the most popular U.S. online
proxy system give it a pro-management slant.
investors log on to Broadridge Inc's (BR.N)
well-known proxyvote.com website, they arrive at a screen with a prominent
virtual button. With one click, the button sets votes "for" all of a
corporate board's recommendations, from electing directors and approving
executive pay to adopting anti-takeover defenses.
shareholder must click again on a follow-up screen to cast the votes, there
is no corresponding button to set votes "against" all management positions
with one click. Instead, shareholders who do not click the button must set
votes on each question individually.
"If you have
a lack of symmetry, it opens the door for bias," said Glyn Holton, founder
of shareholder group U.S. Proxy Exchange.
narrowing at many corporate contests this year, activists worry that the
system makes it too easy to vote shares as companies wish and swing close
"It is really
unfair and part of the general attitude of corporate America to tilt the
advantage to directors and management over share owners and activists," said
Ken Steiner, a New York investor who files resolutions at dozens of
companies each year. He called the button "fundamentally undemocratic."
design does not skew votes and conforms to voting rules, Broadridge Senior
Vice President Chuck Callan said. Proxyvote.com encourages voting by retail
shareholders, a group whose participation in corporate elections has been in
decline of late, he added.
allowing broad votes with management "does not impede choice," Callan said.
"There are messages and alerts that indicate for people exactly what's going
investors, on average, back companies on questions like pay or director
nominations at different rates, showing they do not blindly vote as
management wishes, Callan added.
the U.S. Securities and Exchange Commission, which regulates proxy voting,
declined to comment on proxyvote.com.
PLUMBING UNDER REVIEW
The SEC has
made several efforts lately to improve the resilience of proxy voting after
technical problems cropped up. In 2008, for instance, Yahoo Inc (YHOO.O)
had to correct the count of votes for its directors after problems were
discovered in Broadridge's tallying.
Since a 2007
rule change, corporations have looked to the Web to gather proxy votes, in
part to reduce the costs of bulk mailing materials that many small
to proxyvote.com now spikes sharply each April, the peak of the proxy voting
season. The site drew 388,000 unique visitors last month, up from 386,000 in
April 2011, according to data from Internet tracking firm comScore, Inc.
New York-based Broadridge said retail shareholders had registered online
votes for 7.8 million stock positions they held in the 12 months ended June
30, 2011, up from 6.2 million for the same period three years earlier.
about the central button follow others that activists have made about
proxyvote.com over the years, such as a default setting that records votes
left blank as being cast for board recommendations. That default is similar
to those of traditional paper proxy cards at many companies.
the impact of the vote-with-management button on proxy tallies vary, and
corporate governance activists offered no example of an election outcome
that hinged on the feature.
the button might reduce the share of votes "for" management positions by as
many as several percentage points at companies with many retail investors,
said Carl Hagberg, whose namesake New Jersey company provides inspectors to
oversee about 400 corporate elections per year.
several percentage points could make a difference in some close contests.
For instance, Forest Oil Corp (FST.N)
shareholders approved the pay of top officials by just 49,267,173 votes in
favor and 48,936,670 against on May 8. Proxyvote.com was one way investors
in the Denver energy company could vote.
votes in that proxy "were not skewed by use of Broadridge's e-voting
would be a tradeoff to eliminating the button: Such a move would probably
reduce individual investors' votes to below already-low levels, proxy
monitor Hagberg said.
simply makes voting quicker and easier," he said, adding that dissident
shareholders can still vote on individual matters -- or sell their stock.
everyone approves of promoting turnout for its own sake.
just blindly following management, you're better off not voting," said James
McRitchie, publisher of the corpgov.net website and a critic of the
Ross Kerber; Editing by
and Lisa Von Ahn)
© Thomson Reuters 2012.