Academic

Yesterday the SEC amended the e-proxy rules so that, among other things, companies would have greater flexibility with regard to the format and content of proxy materials distributed over the Internet.  The SEC also launched two other initiatives aimed at increasing shareholder voting participation.  Those initiatives are a "Spotlight on Proxy Matters" that provides information on proxy and e-proxy voting, and an Investor Alert that discusses recent changes in the voting process and then reminds shareholders that their "involvement is essential to the corporate governance" of the companies they own, and states "Simply put, vote your shares!"  All of these efforts are aimed in part at addressing the fact that the implementation of the e-proxy rules apparently caused retail voting to "fall off a cliff."  And then there is the concern that this free fall will be accelerated by changes that may result from amended NYSE Rule 452 that took effect on January 1 and means that brokers no longer have discretion to vote uninstructed shares in uncontested elections.  So will the efforts to get out the retail vote work?  Unclear.

As its adopting release notes, the SEC's actions are based in part on the premise that the dip in retail participation may have stemmed from confusion about the e-proxy process.  Hence, the new e-proxy rules enable companies to include explanatory materials regarding their reasons for using e-proxy, the effect of that use, and the mechanics of the e-proxy rules.  Importantly, there was some evidence of voter confusion in this area, and hence the SEC efforts to clarify the rules both through its amendments and its other initiatives seems like a positive and important development.  But if the erosion in the retail participation vote stems from deeper issues, such as general apathy, or a general preference for paper over electronics in the voting process, then clarifying the voting process and reminding shareholders of their voting rights may not be enough to stop the bleeding in this area.