| BOSTON, March 20
BOSTON, March 20 Pressured by regulators,
websites that help collect shareholders' votes have removed a
button that set all votes as recommended by boards of directors
- a controversial design that seemed to give an edge to
The U.S. Securities and Exchange Commission had expressed
concern to the sites, which cater to retail investors, that the
one-click button created an uneven playing field.
The removal of the button could make it harder for boards of
directors to nudge individual investors, who typically control
about 30 percent of companies' shares, to vote in favor of
company leaders in proxy contests.
The button set all of a shareholder's votes - such as on
electing directors or enacting a poison pill takeover defense -
to the recommendations issued by a company's board. It was a
common fixture on leading proxy voting web sites like Broadridge
Financial Solutions Inc's proxyvote.com, and similar ones
like those run by Computershare Ltd and a unit of Wells
Fargo & Co.
Although investors still had to click further to cast their
votes, there was no competing button to set all votes against
management and shareholder activists complained last year that
the buttons should be eliminated.
"You have to give people a real choice," said Charles Elson,
who directs a corporate governance center at the University of
Delaware and has followed the debate. "When it comes to online
ballots, if you design it in a way that encourages people to
vote with management, that's not real choice."
Any change in proxy voting mechanics could make for tighter
contests as shareholder activists challenge management.
Last year, investors managed to get 40 percent of
shareholders to vote to strip JPMorgan Chase & Co Chief
Executive Jamie Dimon of his chairman title. Some pension funds
have requested another vote this year on the issue.
A PARTIAL WIN
Broadridge has told its corporate customers that it
eliminated the button on proxyvote.com after hearing the SEC's
new stance. The company, based in Lake Success, New York,
explored with the SEC how "it could accommodate the SEC's new
position in light of its potentially negative impact on retail
voting," it said in a Dec. 20 letter to clients disclosed by
legal education site thecorporatecounsel.net.
Broadridge Senior Vice President Chuck Callan told Reuters
by email that the button was removed from proxyvote.com in
January and from services for voting via telephones and mobile
devices in February. He declined to comment further.
Thomas Kim, chief counsel of the SEC's division of
corporation finance which oversees the issue, declined to
comment. But in remarks at an event last month run by the
Practicing Law Institute, Kim called the vote-all buttons
inconsistent with rules requiring even-handedness and said the
SEC had told site operators of its concerns.
Most made changes, Kim said, and also tweaked systems to
record votes via phones or mobile devices. The agency also spoke
with corporations who in theory would have benefited from the
prior setup. But no executives defended it, he said.
"Everybody acknowledged that it was actually tilted in favor
of management," Kim said, according to a recording of his
An alternative would be to provide shareholders a way to
vote all-against management as well, Kim said. Broadridge's
letter said that option was not feasible technically .
Eliminating the pro-management button did not fully satisfy
shareholder activists. When an investor does not vote on a
particular question on an online ballot, the SEC still allows
the sites to assign the vote as recommended by the board of
directors since that mimics how paper ballots are treated.
The new SEC approach is only "a partial win" because of the
blank vote assignments, said James McRitchie, publisher of
corpgov.net and a critic of the pro-management button.
Still, eliminating the button should help equalize contests,
said Adam Kanzer, member of an SEC investor advisory panel and
general counsel of Domini Social Investments in New York.
"It probably biased votes," he said of the prior designs.
"To set that as the default puts in your head that if you want
to go against management, you have to take an extra step."
(Reporting By Ross Kerber in Boston; Additional reporting by
Tim McLaughlin; Editing by Aaron Pressman, Dan Wilchins and Tim