Shareholder proposals requesting that companies appoint an independent chairman were one of the most common shareholder resolutions placed on U.S. ballots in the first half of 2012, and it is looking like this will also be the case for the 2013 proxy season. Since January 1, 2013, Glass Lewis has reviewed more than 50 shareholder proposals requesting that companies either separate the roles of chairman and CEO or that they appoint an independent chairman of the board. Of these proposals, the one that has arguably received the most attention was the proposal put forth at JPMorgan requesting that the firm adopt a policy that would separate the roles of chairman and CEO, a proposal which received over 40% shareholder support in 2012 at the firm.
While the final vote tally for this proposal will be announced at JPMorgan’s annual meeting on May 21, both companies and shareholder proponents have historically been granted access to real-time results of votes cast regarding certain proposals prior to the annual meeting. As discussed in a recent New York Times article, this knowledge allows companies and proponents to invest resources in gaining a favorable outcome prior to a meeting. According to Charles M. Elson, director of the John. L. Weinberg Center for Corporate Governance at the University of Delaware, this “is a critical part of the process.” However, this process was interrupted after an employee of the Securities Industry and Financial Markets Association (“SIFMA”) requested that Broadridge, which distributes materials on behalf of banks and brokers and provides voting tabulations, cut off access to vote results for organizations that are sponsoring shareholder proposals. Broadridge agreed, stating that brokerage firms are its clients therefore it is “contractually obligated” to comply with this request.
SIFMA has stated that it had concerns regarding “the authority of a vendor to release confidential information.” As such, according to Broadridge senior executive Lyell Dampeer, the new Broadridge policy will apply to many other votes at U.S. companies going forward.
On May 17, the Council for Institutional Investors (“CII”) sent a letter to SEC Chairman Mary Jo White in which the investor organization expressed “deep concerns” regarding Broadridge’s policy change and highlighted the “unintended consequences to the proxy system” of not disclosing voting tallies to shareholder proposal proponents, including the potential for investors to delay their voting until just before deadline, which could impact the efforts by companies to determine if they have reached quorum.
According to CII, “proxy distributors should continue to provide voting information with the appropriate confidentiality safeguards necessary to ensure compliance with the federal securities laws, to issuers and to proponents – whether or not proponents retain the proxy distributors to disseminate materials. … If Broadridge cannot demonstrate fairness to all interested parties, regulators should intervene.”
“We don’t have a view on this but we are caught in the middle,” noted Mr. Dampeer. “We act at the behest of our clients.” He further stated that Broadridge wants the SEC, which has not appeared to have made any comments on the matter, to settle this issue.
On May 19th, it was reported that, following a series of discussions with New York State’s attorney general, Eric T. Schneiderman, JPMorgan agreed to direct Broadridge to allow proponents access to the company’s vote results. However, at this time, it is unclear if Broadridge’s policy against allowing proponents access to real-time vote results will still apply to voting matters at other companies.