According to the SEC, “client directed voting” will be included in a forthcoming concept release on “proxy plumbing” issues and SEC Chairman Mary L. Schapiro now indicates review by the Commission is forthcoming (see this post on the Forum). It is critical that shareowners become familiar with this term. The SEC can shape their concept release to facilitate entrenchment, by essentially reestablishing a limited form of broker voting, or their framework can further the interests of shareowners and the larger society through an open and competitive system.

Background

Historically, most retail shareowners toss their proxies. During the first year under the “notice and access” method for Internet delivery of proxy materials, less than 6% voted. This contrasts with almost all institutional investors voting, since they have a fiduciary duty to do so. “Client directed voting” (CDV), a term coined by Stephen Norman, is seen by many as a solution for getting more retail shareowners to vote, ensuring companies get a quorum, and helping management recapture a good portion of the broker-votes cast in their favor that evaporated with recent reforms. An open form of CDV, could result in similar impacts but would also create much more thoughtful and robust corporate elections.

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