Has the Council of Institutional Investors (CII) turned over a new leaf or am I only beginning to notice because they recently came out publicly agreeing with me? Three years ago a group of us petitioned the SEC to clarify that the same rules that apply to proxies also apply to voter information forms, VIFs. The group included Glyn Holton, Mark Latham, Eric M. Jackson, James P. Hawley, Andrew Williams, Andrew Eggers, Bradley Coleman and Erez Maharshak.
Recently, CII wrote to the SEC in support of that position, without explicitly citing our earlier petition. In their April 5 letter, concerned with a proposed rule’s incentives to create “enhance brokers’ internet platforms (EBIPs), CII reminded the SEC that key to the stated intent of the rule was to provide benefits to investors and corporate governance generally. Before moving forward on EBIPs, CII recommends action or clarification on the following:
- VIFs should be subject to the same degree of SEC oversight as proxy ballots.
- The voting options should not unfairly tilt votes in favor of management recommendations.
- The VIFs should be “prohibited from describing proxy ballot items using wording, headings or fonts that differ from those used on the related proxy card.”
- VIFs “should not be permitted to tally unmarked shareowner votes in favor of management’s recommendations when the underlying voting items are otherwise ineligible for discretionary voting by brokers.” They shouldn’t be allowed “to make an end run’ around the broker voting requirements of NYSE Rule 452 and electronically ‘stuff the ballot box’ for management.”
Of course, I’ve written widely on these issues. A few examples follow:
- Comment letter to SEC on proposed distribution fees
- Proxy sites dump one-click vote button on SEC concerns
- Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime
- Don’t Let Companies Change Shareholders’ Blank Votes
- Jim Crow “Protections” for Retail Shareowners
- Restoring Balance in Proxy Voting: The Case For “Client Directed Voting”
- Dodd-Frank and Proxy Plumbing Offer Opportunity to Keep Blank Votes from Going to Management
- Don’t Miss Opportunity to Level Playing Field in Corporate Elections
- “Corrected” Ballot at Altrea Tips Votes to Management
About a year ago I posted Changes at CII, in which I said,
I think CII has improved greatly since Ann Yerger took over as CEO. With Anne Sheehan as Chair and Mike McCauley as Treasurer, I think we can see expect even more artful use of resources at CII and more outreach to retail investors.
Some of the officers have changed but it looks like changes at CII continue for the better. I should also mention, CII weighed in on another important issue, unbundling proxy proposals. See April 26, 2013 CII follow-up letter to SEC supporting unbundling management proposals on the proxy. This letter was brought to my attention by Andrew Shapiro of Lawndale Capital Management, LLC.
The Council of Institutional Investors (CII) has recently agreed with Lawndale’s interpretation that Equal’s Proxy has “bundled two separate and unrelated matters on advance notice and special meetings into a single proposal.” This is Proposal # 6 on Equal’s proxy for its upcoming May 13, 2013 meeting, requesting shareholders ratify special meeting, advance notice (plus what Lawndale also considers beyond-the-norm director nomination qualification requirements) by-law amendments that Equal’s board unilaterally adopted in January.
The CII’s General Counsel Jeff Mahoney wrote a letter this past Friday April 26 to Lona Nallengara, Acting Director of the SEC’s Division of Corporation Finance (cc’ing each SEC Commissioner,) illustrating Equal’s apparent violation of Rule 14a-4 being another of many “bundled” proposals that have escaped or passed through SEC review to the dismay of the Council.
We applaud the Council for its continuing policies and efforts to not only “ensure more informed decision making on each matter presented, but also prohibits electoral tying arrangements that restrict shareowner voting choices on important matters put before them by management for approval.”
Indeed, we applaud CII on both these important issues. Retail and institutional investors must work together to ensure proxy mechanisms and corporate elections are honest and fair. Crony capitalism is a danger to society and properly functioning markets.
CII made much more in the way of headlines recently when they asked the SEC to make vote counting and reporting at companies fair, with a level playing field. Here’s one example of coverage: Investor Group Asks S.E.C. to Intervene on Access to Shareholder Vote Totals, New York Times, 5/17/2013.
The Council of Institutional Investors has asked the Securities and Exchange Commission to intervene after the main company that provides real-time tabulations on shareholder votes stopped giving this information to the groups that sponsor proposals.
The running tallies on shareholder votes are generally kept under lock and key. Only a handful of parties, notably the companies who are the subject of the proposal and the sponsor of the proposal, get to see them. Most firms facing shareholder proposals use a company named Broadridge to distribute investor information and provide information on how shareholders are voting.
Last Friday though, at the behest of Wall Street’s main industry lobbying group, the Securities Industry and Financial Markets Association, Broadridge stopped giving shareholder sponsors access to real-time updates. The move drew fire from some investors who say knowing the current tally of votes helps both sides devise their campaigns. For instance, if one side is losing, it might send out an extra mailing or make more calls.
The decision by Broadridge to shut off real-time vote access to sponsors of shareholder proposals comes in the middle of one of the most closely watched investor votes in years — over whether to separate the roles of chairman and chief executive at JPMorgan Chase. While the vote is nonbinding, if could strip Jamie Dimon, the bank’s chief, of the chairman’s title.
Lyell Dampeer, a Broadridge executive, confirmed in an interview this week that he changed his firm’s policy after a call from Sifma. Broadridge is paid by the brokerage firms so he said he was “contractually obligated” to comply with the request. He did not return a call for comment for this article.
The best coverage of this later scandal I have seen has been from Broc Romanek’s The Battle Over JPMorgan’s CEO/Chair Split Proposal: The Gloves Are Off! I hope the SEC heeds these calls by the Council of Institutional Investors and I hope CII continues to raise these important issues that are so crucial to having fair and efficient markets.