Recently, Corp Fin’s Office of Mergers & Acquisitions issued this notable no-action relief to ExxonMobil to enable retail holders of the company to provide standing instructions to have their votes cast at annual shareholder meetings in support of the board’s recommendations. Here’s a WSJ article about the program.
This type of program might be attractive to those companies that have large numbers of retail holders as these types of investors have been voting less frequently in recent years, making it more difficult for company proposals to pass. In addition, the elimination of broker discretionary voting at several large brokerage firms has made it difficult for many companies to even establish a quorum to hold their annual shareholder meetings.
Corp Fin’s response notes these representations made by the company about the program:
1. Universal access for retail investors: The Retail Voting Program is open to all retail investors – beneficial owners or record holders, regardless if they hold the company’s shares directly or through intermediaries like banks, brokers, or plan administrators – at no cost, with equal opportunity to enroll.
2. Exclusion of registered investment advisers: Investment advisers registered under the 1940 Act who vote on behalf of clients are not eligible to participate.
3. Annual opt-in reminder: Retail shareholders who opt in will get an annual reminder (outside of the proxy season) about their enrollment and voting instructions, along with an option to opt out.
4. No-cost opt-out and override options: Shareholders who have opted in can cancel their standing voting instructions at any time by going through the normal voting process to opt out and can even override instructions on particular individual proposals – for free. The company’s proxy must describe how to opt out and override.
5. Continued access to proxy materials: Retail participants will still receive all proxy materials for each shareholder meeting, and their voting rights remain fully intact and unrestricted.
6. Website disclosure: The Retail Voting Program will be fully disclosed on the company’s website and in its proxy statements.
In addition, here are other notable features of the program contained in the company’s incoming no-action request:
- Role of vote-processing agent: The mechanics of the voting process will be designed and executed with support from the company’s vote-processing agent, meaning that Broadridge will play a huge role in this for many companies (which I’ll be blogging more about soon).
- Retail holders can opt out for special situations: Those retail holders that opt in can specify in their voting instructions whether they opt in for all matters – or they can opt in for all matters except special situations, such as contested director elections or M&A transactions that require shareholder approval.
- Doesn’t apply to shareholder meetings beyond annual or special meetings: The no-action relief applies to voting at annual or special shareholder meetings but it doesn’t cover actions taken by shareholder written consent, requisitions for special meetings or tender offers.
There are other issues to consider including how proxy advisors and institutional investors will react. And whether this type of program is applicable under the state law applicable to your company (e.g. Section 212(b) of the Delaware General Corporation Law states that “no such proxy shall be voted or acted upon after 3 years from its date, unless the proxy provides for a longer period”).
Authored by
Broc Romanek