Broadridge Threatens Right to Proxy Voting

Broadridge Threatens Right to Proxy Voting

Many were not surprised when the SEC, under Trump appointees, made it more difficult for retail shareholders to submit proposals. Read about our ongoing efforts to overturn that roadblock at Restore Shareholder Proposal Rights.

However, most will be surprised that Broadridge Financial Solutions filed a no-action request that could end meaningful proxy voting at meetings, especially virtual annual shareholder meetings (VSMs) where those presiding cannot see who is still trying to vote. This is ironic since Broadridge has long touted that virtual shareholder meetings can help ensure shareholders can vote, and they are the provider of choice for both running VSMs and voting. (Virtual shareholder meetings)

Shareholder proponents can be barred from submitting proposals to a company for two years if they fail to present them at the meeting. However, according to Broadridge, companies should be allowed to open and close the polls largely at will, without considering suggestions from shareholders that polls be left open for a reasonable time after proposals are presented for consideration. Through this post, I am requesting assistance from readers. Contact me if you want to help. (See coverage in Responsible Investor, Corporate governance experts await SEC ruling on AGM voting windows proposal)

Broadridge Threatens Right to Proxy Voting at Virtual Shareholder Meetings

The following discusses a shareholder proposal that I filed at Broadridge and their no-action request to the SEC. My proposal requests that Broadridge:

provide a reasonable time for votes to be cast or changed after the final proposal is presented at the Company’s annual general meetings and that our company issue a brief report on current practices and options to address this issue.

Broadridge argues shareholder meeting procedures, including the time allowed to vote, are off limits as a subject for shareholder proposals under the “ordinary business” exclusion. If the SEC accepts that interpretation, companies will be free to open and close the voting polls at any time during the meeting, even before any of the proposals are presented, without any meaningful way for shareholders to object without going to court.

That presents an existential risk to a basic shareholder right to vote. It could also present a reputational risk to Broadridge since they have spent a decade claiming that virtual shareholder meetings “enhance retail participation in meetings.”

Broadridge Threatens Right to Proxy Voting: Background

In 2020 I was part of a working group that produced the Report of the 2020 Multi-Stakeholder Working Group on Practices for Virtual Shareholder Meetings. Participants included a wide variety of stakeholders, including Broadridge and myself. See Appendix A. One statement contained in the report that I think we all agreed on was the following:

Voting is a shareholder’s most important and powerful right.

Before COVID-19 hit the USA, Broadridge spent much time and effort trying to convince companies to move to virtual meetings using their services. Most shareholders accepted the benefits of hybrid meetings but many decried “virtual-only” meetings. See Virtual Lockout at Corporate Meetings.

At the 2020 Broadridge annual meeting, voting was cut off immediately after I presented my proposal on political disclosures, leaving no time for anyone in attendance to vote or change their vote on that issue after hearing my rebuttal to Broadridge’s opposition statement. The SEC allows companies to exclude proponent proposals for two years if they fail to present them. However, presenting proposals is an otherwise meaningless ritual if no one can vote or change their vote based on what is presented. If voting is a shareholder’s most important right, why did Broadridge deny their shareholders the powerful right of informed voting in 2020?

Now Broadridge has a no-action request to the SEC, seeking to omit my proposal. Again, it simply requests our Company

provide a reasonable time for votes to be cast or changed after the final proposal is presented at the Company’s annual general meetings and that our company issue a brief report on current practices and options to address this issue.

Broadridge Threatens Right to Proxy Voting: Their Arguments

In its no-action request, Broadridge argues, “The Proposal seeks to manage the conduct and procedures relating to annual meetings of shareholders, which are matters of the Company’s ordinary business.” It “micromanages” the company “by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment.”

Broadridge says voting at the meeting is “a matter relating to the company’s ordinary business operations.” Scheduling the vote is so “fundamental to management’s ability to run the company” that it cannot be “subject to direct shareholder oversight” or apparently input. Asking for a reasonable time to vote after proposals are presented is a matter of such a complex nature that “shareholders, as a group, would not be in a position to make an informed judgment,” they write. (Shareholders have no idea how much time they need to vote during the meeting, is what they argue.)

Broadridge argues the terms “appropriate changes” and “reasonable time” are “inherently broad, vague and indefinite terms that are subject to a wide range of interpretation.” They allege my Proposal doesn’t provide sufficient guidance for “the Company’s directors or shareholders to understand what changes would be needed in order to satisfy the Proposal.”

My Proposal cited a brief study of recent meetings. Ten out of 31 companies allowed 0-10 seconds to vote after proposals were presented, 5 allowed up to 30 seconds, 6 allowed 50-60 seconds, and 10 allowed 2 minutes or more.  Broadridge’s no-action request states, “It is not clear from the Proposal or supporting statement whether these periods or any other period would constitute a ‘reasonable time’ to vote.” Broadridge’s Board feigns confusion. Is 0 seconds a reasonable enough time to vote? They claim they don’t know. Perhaps anticipating their lack of insight, my Proposal asks Broadridge to issue a brief report on current practices and options to help them think it through.

Read the No-Action Request. (includes a copy of the Proposal)

Broadridge Threatens Right to Proxy Voting: Claims of Ignorance

As stated above, Broadridge claims it doesn’t know how much time would be a reasonable amount for voting. “The Company would not be able to reasonably determine how to determine the ‘appropriate changes’ to governance documents or proxy statements and how to set up ‘reasonable time’ for vote (sic) if shareholders approve the Proposal.” In their no-action request, Broadridge pleads ignorance. In their publicized reports (Virtual shareholder meetings), they claim expertise.

Broadridge hosted 1,934 virtual shareholder meetings in the first half of 2022, a slight increase from the 2021 season. This growth demonstrates Issuer’s longerterm commitment to virtual meetings as the preferred solution for shareholder meetings, as 17% were new adopters. Through the end of calendar year 2022, Broadridge projects to complete >2,300 VSMs…

As an industry leader and pioneer in this space, the Broadridge VSM continues to set the standard. (my emphasis) The Broadridge platform authenticates ALL shareholders in two clicks, enabling them to attend, vote and ask questions, eliminating additional disclosures in the materials or multi-step attendance processing.

Broadridge goes beyond best practices, except when it comes to giving time to vote

Broadridge goes beyond best practices, except when it comes to allowing time to vote

Approximately 52,052 people attended 1,934 VSMs hosted by Broadridge during the first half of 2022 with an average of 27 shareholders and guests. 84% of the meetings allowed guests to attend. Shareholder and issuer participation remained strong in 2022. The average duration of meetings during this time was 16 minutes with an average of 2 votes submitted live during the meeting.

Broadridge claims it has no idea what a reasonable time to vote would be. Yet, Broadridge knows the average number of meeting attendees is 136 when a shareholder proposal is presented versus 17 for those meetings without a shareholder proposal. An average of 10 votes are cast at meetings with a shareholder proposal instead of 1 at meetings without a shareholder proposal. There is an average of 38 questions asked at companies with shareholder proposals versus 3 at meetings without such proposals. (Virtual shareholder meetings)

Broadridge is in the best position to determine how much time is required to vote since they not only host the vast majority of virtual shareholder meetings but most shareholders also use their voting platform. Yet, Broadridge essentially argues they don’t know how much time is a reasonable amount and that they should be free to close the voting polls whenever they want, without input from shareholders, since conducting the meeting is a matter of “ordinary business,” exempt from shareholder input through advisory proposals. They cite a bunch of outdated no-action letters, implying that the right to vote at a meeting is equivalent to the right to ask questions, the right of all shareholders to speak, and the right to “dialogue with directors” before and after annual meetings. Clearly, the right to vote is quite different from these other alleged “rights.”

Broadridge also provides the following advice in their Annual Meeting Handbook 2023:

Typically, questions/comments about the proposals in the proxy statement are allowed after they have been presented during the meeting. Only shareholders may ask questions at this time. Shareholders are typically given 2-3 minutes to speak, offer their comments or ask their questions. They may be limited to one question or comment.

If questions come up that are not related to the proposals, the chair will state that there will be time after the formal part of the meeting for questions/comments of a more general nature. Tact and good judgment are required to manage the process, particularly if there are many shareholders who wish to speak.

Broadridge advises potential clients how much time proponents are typically given to present their proposals and that most companies allow a separate question-and-answer period for shareholder proposals. Broadridge probably has systems in place to track the time taken by users to vote their proxies, as this data could be valuable for process optimization, understanding user behavior, and improving their platform’s efficiency. Yet, when presented with a list of times ranging from 0 seconds to 10 minutes, in their no-action request Broadridge claims, “It is not clear from the Proposal or supporting statement whether these periods or any other period would constitute a ‘reasonable time’ to vote.”

Broadridge Threatens Right to Proxy Voting: Cites Brinker Precedent Re VSMs

Interesting that Broadridge cites the Staff decision regarding Brinker.

See Brinker International, Inc. (Sept. 22, 2021) (“In light of technological progress and public health guidance in light of the COVID-19 pandemic, in our view the issue of shareholders’ virtual access to annual and special shareholder meetings does not relate to the Company’s ordinary business operations.”)

Our Company goes on to contend that the Brinker exception “does not apply to the Proposal and the Proposal does not otherwise implicate a significant social policy that would override the exclusion provided by Rule 14a-8(i)(7) for proposals relating to an issuer’s ordinary business operations.”

Of course, Broadridge has the right to speculate. However, if the right to vote at a shareholder meeting does not implicate a significant social policy, what could? As Broadridge has implicitly agreed, “voting is a shareholder’s most important and powerful right.” Voting is the most essential business of the annual shareholder meeting. Surely voting is s significant social issue. What good is it to have shareholder proposals on climate change, workforce diversity, independent board leadership, corporate political spending, etc., on corporate proxies if the board can close voting before shareholders can consider the presentations given at the shareholder’s meeting? As argued by Broadridge, companies are free to close the voting polls even before proposals are presented since doing so falls under the rubric of “ordinary business.” Voting is “not “ordinary business;” it is an essential right.

Broadridge Threatens Right to Proxy Voting: Help Is Requested

I don’t want shareholders to lose their ability to vote after they have time to consider the proposals presented, which is more likely if Broadridge wins its no-action request. Shareholders should have all the information that will be provided at the meeting to vote intelligently. Additionally, as an investor in Broadridege, I don’t want our Company to destroy its reputation with shareholders by leaning too heavily in favor of issuers.

I welcome your feedback on this critical no-action request. Following are a few questions for your consideration, but please feel free to ask and answer any you believe are relevant.

  • Is the question of when to vote at an annual meeting so complex that shareholders cannot understand if waiting a reasonable amount of time after items to be voted are presented would be beneficial?
  • What is a reasonable amount of time to vote at a virtual meeting?
  • Should shareholders be denied input on when they should be allowed to vote during shareholder meetings under the ordinary business exclusion?
  • Is requesting a reasonable time to vote after presentations are made micromanaging the Company?
  • What is the purpose of shareholder presentations if companies are free to close the polls before, during, or immediately after presentations made without giving shareholders time to vote or change their vote?
  • How can Broadridge be persuaded to withdraw its no-action request?
  • Why should SEC Staff deny the no-action request?
  • If SEC Staff approves the no-action request, would you help finance further legal action?

   

Broadridge Threatens Right to Proxy Voting: Related Posts

No Time to Vote

Virtual Meeting Problems Highlighted by CII

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