Blanks Votes: Australia & US

It is great to see Manifest, the proxy voting agency, raising the issue of management voting proxy items left blank by shareowners.

In the majority of markets with developed shareholder voting procedures, for each proposal, the shareholder has three choices; to vote for, against or abstain. Alternatively, shareholders can actively elect for the chairman to direct their votes at his/her discretion (a directed proxy). In cases where the shareholder has not made a choice in any regard (an undirected proxy), it is common for the Chairman to also exercise discretion. In anything but exceptional circumstances (cases of shareholder resolutions or internal board struggles), it is to expected that these votes will be directed in favour of proposals…

Manifest recognises the routine nature of chairman voting undirected proxies, but notes the potential conflict of interest. Rather than supporting the automatic prohibition of chairman voting undirected proxies on say-on-pay, as is to be temporarily the case in Australia, Manifest considers that the clear detailing of how proxies might be directed should they not be voted, is the most transparent and effective solution to this dilemma. (Discretion Allowed? Should the chairman have a say on say-on-pay?, 8/12/2011

I raised this same issue in the United States with the SEC in 2009. The petition received many favorable comments. The issue hasn’t been addressed here either. Additional comments to the SEC might help. Send comments to rule-comments@sec.gov. The subject line of your message must include File Number 4-583. If you attach a document, indicate the format or software used (e.g., PDF, Word Perfect, MS Word, ASCII text, etc.) to create the attachment.  See also, Don’t Let Companies Change Shareholders’ Blank Votes, Harvard Law School Forum on Corporate Governance and Financial Regulations.