SEC Rule 14a-4(a)(3) states the proxy “shall identify clearly and impartially each separate matter intended to be acted upon, whether or not related to or conditioned on the approval of other matters, and whether proposed by the registrant or by security holders.”
Broadridge claims they don’t have to follow the rules required for proxies because they use a Voter Information Form (VIF), not a legal proxy. Broadridge can apparently reference a shareholder proposal however they want, or perhaps it would be more accurate to say however the issuer wants. The SEC doesn’t appear to be either aware or concerned that retail shareowners getting VIFs, not proxies, have no idea what they are voting for or against without referencing back to the Definitive Proxy Statement. With only about 20% of retail shareowners voting (5% under e-proxy), it is likely that many who do choose to vote do so based only on the ballot description.
John Chevedden is attempting to bring this concern once again to the SEC’s attention, using his proposal at Altera as an example. (See his CheveddenToSECreAltera4-1-2010. For additional background on this issue, see previous post Investors Against Genocide Fighting American Funds, Broadridge and Vague SEC Requirements: More Problems Solved Using Direct Registration.)
Here’s how Broadridge/Altera represent the proposal on the VIF, which most retail shareowners get:
TO CONSIDER A STOCKHOLDER PROPOSAL REQUESTING THAT BOARD TAKE THE STEPS NECESSARY SO THAT EACH STOCKHOLDER VOTING REQUIREMENT IN ALTERA S CERTIFICATE OF INCORPORATION. (see MoxyVote.com)
What the…? That’s not a statement; it is nothing but gobbledygook. Here’s how Chevedden’s actual resolved statement reads:
Shareholders request that our board take the steps necessary so that each shareholder voting requirement in our charter and bylaws, that calls for a greater than simple majority vote, be changed to a majority of the votes cast for and against the proposal in compliance with applicable laws. This includes each 80% supermajority provision in our charter and bylaws.
Of course, this and many other issues could be corrected if we moved to direct registration of all shares. However, in the meantime the SEC should simply rule that all requirements for proxy statements, such as Rule 14a-4(a)(3), also apply to VIFs. I urge readers to bring this abusive practice to the attention of the SEC’s Investor Advisory Committee through use of their online comment form and to Chairman Mary Schapiro.
Comment: Sarah Wilson, of Manifest, made their subscribers aware of this issue (And another good reason for a proxy system overhaul, 4/3/2010) and also noted that voting problems are worldwide. Invisible democracy hits Italian board slate (4/2/2010), discusses the case of Generali, where the vote deadline is the same day as the publication of the director lists.
The award for the worst voting deadline of the year so far… (4/2/2010), where Australian-listed Qbe Insurance Group has a 32 day deadline. This contrasts with Manifest’s 15 year practice of allowing proxies submitted electronically as close as 2 days before the vote cut-off so that more informed voting decisions could be made. If you can transfer large sums of money around the work in seconds, why can voting be executed closer to the meeting date. Manifest argues, “Voting rights are legally no different to buying and selling rights. In that regard fund managers are obliged to seek best execution on behalf of their clients.”
I understand that in both cases the local market deadlines in those markets is 48 hours… the problems may lie with Broadridge. How can you have a vote deadline in the past!? Haw Broadridge become too much of a world-wide monopoly.
Keep in mind that Broadridge’s clients are the banks and brokers – not management.
Broadridge’s distillation of Chevedden’s SP at Altera is pretty crappy – no question about that – but I don’t think that Altera’s management can be blamed for it. Broadridge itself condensed the proposal, not Altera.
If anything, I feel bad for the guy/gal at Broadridge whose job it is to squeeze Chevedden’s SP into the VIF – it’s not exactly simply put. On top of that, I wonder how many other sets of proposals that guy/gal had to fit into VIF format. More likely than not, almost all of those proposals (oustside of D&A proposals) were completely different from one another.
Ted, Good point about banks and brokers being Broadridge’s clients. However, just as banks and brokers almost always vote with management on proxies if given the opportunity, Broadridge seems to always error on the side of management in translating proxy items… as if by the invisible hand of Adam Smith. Have you ever seen them mangle a management proposal?
Regarding the complexity of Chevedden’s proposal, I think it is fairly standard. Proposals to end supermajority charter and bylaw provisions have been around for years and generally get a good reception from shareowners, when they know what the issue is.