On July 1, the Commissioners of the Securities and Exchange Commission voted 3 – 2 to deny the use of the broker vote in uncontested director elections. Readers interested in the American Business Conference’s views on this matter can access our comment letter here.
The change to the broker vote was proposed by the NY Stock Exchange (which has some explaining to do to its listed companies) and long supported by union pension funds and the Council for Institutional Investors, which, from a policy standpoint, is strongly influenced by those same pension funds. Getting rid of the broker vote, an action that will suppress the vote of individual shareholders, who tend as a group to be pro-management, amounts to giving institutions, such as labor pension funds, more power. Giving labor unions more power, despite their inability to gain members in the private sector themselves, seems to be a theme of public policy lately.
Narrowing the use of the broker vote is just step one. The next step for the unions is the adoption of a rule permitting access to the proxy. The American Business Conference will oppose this “reform,” but given that a majority of the Commissioners are already on record in support, it seems like a done deal.
In summary: if you run a private company, be glad that you do.