NYSE Tries Again to Ban Broker Votes in Director Elections

It's déjà vu all over again. The NYSE is once again proposing to amend its rules to eliminate broker discretionary voting in director elections.

NYSE Rule 452 allows brokers to vote on “routine” proposals if the beneficial owner of the stock hasn’t provided specific voting instructions to the broker at least 10 days before a scheduled meeting.

As Compliance Week has reported previously, the proposal stems from a recommendation by the NYSE Proxy Working Group. NYSE first filed a proposed amendment to the rule—amid great controversy—in October 2006. It was amended twice in 2007 and has been sitting at the Securities and Exchange Commission ever since.

The proposal must be approved by the SEC. SEC spokesman John Nester says it will be “posted soon for public comment.”

In remarks earlier this month, SEC Commissioner Elisse Walter said she believes the agency “should move forward” and determine whether to adopt the amendments.

Supporters of abolishing a broker vote for director elections, such as the Council of Institutional Investors, contend that it’s akin to stuffing the ballot box in favor of management, since brokers often cast their votes in favor of management proposals. However, opponents contend that eliminating broker voting in director elections would make it difficult for small and mid-sized companies to make quorum for their annual meetings and would raise solicitation costs.

The proposed amendment would apply to proxy voting for shareholder meetings held on or after Jan. 1, 2010. If the amendment isn’t approved by the SEC until after Aug. 31, 2009, NYSE will delay the effective date until at least four months after the approval date to a date that doesn’t fall within the first six months of the calendar year.

CII lauded the proposal. “We’re thrilled the NYSE is trying again and we look forward to swift action by the SEC on this long overdue shareholder reform,” deputy director Amy Borrus tells Compliance Week.

Compliance Week will provide readers with full coverage of the rule proposal in an upcoming edition.