May 29, 2012 / 4:31 PM / 8 years ago

Top U.S. proxy vote site favors boards, critics say

BOSTON (Reuters) - Public companies are increasingly using the Internet to collect proxy votes. But shareholder activists say shortcuts within the most popular U.S. online proxy system give it a pro-management slant.

When investors log on to Broadridge Inc’s (BR.N) well-known website, they arrive at a screen with a prominent virtual button. With one click, the button sets votes “for” all of a corporate board’s recommendations, from electing directors and approving executive pay to adopting anti-takeover defenses.

Although the shareholder must click again on a follow-up screen to cast the votes, there is no corresponding button to set votes “against” all management positions with one click. Instead, shareholders who do not click the button must set votes on each question individually.

“If you have a lack of symmetry, it opens the door for bias,” said Glyn Holton, founder of shareholder group U.S. Proxy Exchange.

With margins narrowing at many corporate contests this year, activists worry that the system makes it too easy to vote shares as companies wish and swing close election results.

“It is really unfair and part of the general attitude of corporate America to tilt the advantage to directors and management over share owners and activists,” said Ken Steiner, a New York investor who files resolutions at dozens of companies each year. He called the button “fundamentally undemocratic.”

The site’s design does not skew votes and conforms to voting rules, Broadridge Senior Vice President Chuck Callan said. encourages voting by retail shareholders, a group whose participation in corporate elections has been in decline of late, he added.

The button allowing broad votes with management “does not impede choice,” Callan said. “There are messages and alerts that indicate for people exactly what’s going on.”

Retail investors, on average, back companies on questions like pay or director nominations at different rates, showing they do not blindly vote as management wishes, Callan added.

Officials at the U.S. Securities and Exchange Commission, which regulates proxy voting, declined to comment on


The SEC has made several efforts lately to improve the resilience of proxy voting after technical problems cropped up. In 2008, for instance, Yahoo Inc YHOO.O had to correct the count of votes for its directors after problems were discovered in Broadridge’s tallying.

Since a 2007 rule change, corporations have looked to the Web to gather proxy votes, in part to reduce the costs of bulk mailing materials that many small shareholders ignore.

Web traffic to now spikes sharply each April, the peak of the proxy voting season. The site drew 388,000 unique visitors last month, up from 386,000 in April 2011, according to data from Internet tracking firm comScore, Inc.

Lake Success, New York-based Broadridge said retail shareholders had registered online votes for 7.8 million stock positions they held in the 12 months ended June 30, 2011, up from 6.2 million for the same period three years earlier.

Complaints about the central button follow others that activists have made about over the years, such as a default setting that records votes left blank as being cast for board recommendations. That default is similar to those of traditional paper proxy cards at many companies.


Estimates of the impact of the vote-with-management button on proxy tallies vary, and corporate governance activists offered no example of an election outcome that hinged on the feature.

Eliminating the button might reduce the share of votes “for” management positions by as many as several percentage points at companies with many retail investors, said Carl Hagberg, whose namesake New Jersey company provides inspectors to oversee about 400 corporate elections per year.

In theory, several percentage points could make a difference in some close contests. For instance, Forest Oil Corp FST.N shareholders approved the pay of top officials by just 49,267,173 votes in favor and 48,936,670 against on May 8. was one way investors in the Denver energy company could vote.

Callan said votes in that proxy “were not skewed by use of Broadridge’s e-voting platforms.”

And there would be a tradeoff to eliminating the button: Such a move would probably reduce individual investors’ votes to below already-low levels, proxy monitor Hagberg said.

“The button simply makes voting quicker and easier,” he said, adding that dissident shareholders can still vote on individual matters — or sell their stock.

Still, not everyone approves of promoting turnout for its own sake.

“If you’re just blindly following management, you’re better off not voting,” said James McRitchie, publisher of the website and a critic of the Broadridge site.

Reporting By Ross Kerber; Editing by Aaron Pressman and Lisa Von Ahn

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