An NYSE working group recently issued a report recommending, among other things, that NYSE Rule 452 be amended to no longer allow brokers to vote uninstructed shares in uncontested elections. Briefly, for any shareholder vote brokers are required to seek voting instructions from the beneficial owners of shares held in “street name.” Under current Rule 452, with respect to routine matters, including uncontested elections, if a beneficial owner does not provide instructions, the broker is free to, and typically does, vote these â€œuninstructed sharesâ€? as it chooses (routinely with management). Broker votes of uninstructed shares often represent as much as 30% of votes cast at a shareholdersâ€™ meeting. Hence, if the change to Rule 452 is adopted, management nominees will lose a big chunk of “for” votes. Under a plurality voting standard, this is irrelevant. However, for an election facing a “withhold the vote” campaign and a majority voting standard, it could result in incumbents not being reelected.
Hat Tip: Broc