Corporate Governance

The Problem of Blank Votes

By J. Robert Brown

As we debate access, it seems like every time shareholders turn around they find another design flaw in the system that, oddly, favors management.  The latest is blank votes.

It seems that when a shareholder executes a proxy and decides not to cast a vote for a particular matter, the proxy tabulator apparently fills it in in a pro-management manner (or, more accurately, in conformity with the recommendations of the soliciting committees).  According to a petitioned filed with the Commission by James McRitchie and a group of co-filers:  "When a retail shareowner using Broadridge's proxyvote.com platform votes for or against at least one item on a proxy but fails to vote on other items, each item they fail to vote is cast in favor of the company's recommended position." 

In other words, the practice goes well beyond the practice of brokers voting uninstructed shares.  In those circumstances, brokers cannot vote on any substantive matter deemed controversial.  Blank votes, on the other hand, are in fact voted on substantive matters, controversial or otherwise.  They affirmatively assist in passing management proposals. 

This will be another matter that requires administrative action.  Comments encouraging the Commission to act in this area can be sent to rule-comments@sec.gov with File 4-583 included in the subject line.  

Full post as published by The Race to the Bottom on May 26, 2009 (boomark / email).