Saturday, January 28, 2012

NYSE Further Restricts Broker Discretionary Voting

Citing “recent congressional and public policy trends disfavoring broker voting of uninstructed shares," the NYSE has severely limited broker discretionary voting of uninstructed shares with regard to corporate governance proposals.  Effective January 25, 2012, matters which would have previously been designated “Broker May Vote” will instead be designated “Broker May Not Vote.” 

Under NYSE Rule 452, for certain corporate governance issues to be voted on at board meetings of member organizations brokers could vote customer shares on the proposals, provided that they had not received customer instruction regarding the vote.   These formerly "Broker May Vote" proposals included:

  • de-staggering the board of directors; 
  • majority voting for director elections; 
  • elimination of supermajority voting requirements; 
  • providing for the use of consents; 
  • providing rights to call a special meeting; and 
  • some anti-takeover provision overrides.
In 2010 Rule 452 was amended to prohibit most broker votes for the election of directors, and the Dodd-Frank legislation prohibited broker voting in the election of directors and on executive compensation proposals.  Now, under Information Memo 12-4, the NYSE has further narrowed the the approach to uninstructed shares with regard to corporate governance.

In light of these and other recent congressional and public policy trends disfavoring broker voting of uninstructed shares, the Exchange has determined that it will no longer continue its previous approach under Rule 452 of allowing member organizations to vote on such proposals without specific client instructions. Accordingly, proposals that the Exchange previously ruled as “Broker May Vote” including, for example, proposals tode-stagger the board of directors, majority voting in the election of directors, eliminating supermajority voting requirements, providing for the use of consents, providing rights to call a special meeting, and certain types of anti-takeover provision overrides, that are included on proxy statements going forward will be treated as “Broker May Not Vote” matters.

The full text of Information Memo 12-4 is available at: