A year ago, ExxonMobil secured a favorable no-action position from Corp Fin for a “voting instruction plan” intended to secure more votes from retail shareholders at its annual meeting. The program allows for voluntary standing “opt in” voting instructions for retail holders that follows the board’s recommendations, with annual reminders and the ability to override or cancel.
Broadridge helped to run ExxonMobil’s program – and there was talk that a number of companies would follow ExxonMobil’s lead. But Bigbear AI was the only company that relied upon the ExxonMobil framework over this past year.
Then, on the heels of Goldman Sachs being granted a favorable no-action response for a voting instruction program this week, Tesla received its own favorable no-action response from Corp Fin. The two programs share the same basic concept with the response that ExxonMobil received last year, along with some notable differences. Here’s a press release from Goldman Sachs about its VIP.
Tesla’s framework is broader in how the program could be deployed compared to the Goldman Sachs or ExxonMobil VIPs. Goldman Sachs and ExxonMobil describe a VIP that can mature technologically over time. Tesla goes further: its framework is designed to expressly allow other companies to use it, with a bevy of new enhancements including the use of shareholder-communication providers, centralized Hubs and householding and persistent account instructions.
Here are the primary differences between the two new VIPs as described in the no-action letters:
- Goldman and ExxonMobil have a company-specific program; Tesla offers an industry-wide framework: Tesla expressly asked Corp Fin to approve a framework that any issuer could use, stating that any issuer operating a VIP in the manner described in its incoming letter could rely on the Staff’s relief.
- Tesla envisions centralized “Hubs” covering multiple issuers: This is probably the biggest operational difference. Tesla contemplates centralized management hubs operated by shareholder-communication providers. Through a Hub, an investor could enroll in the voting program of one issuer – or potentially opt in to the programs of all participating issuers whose shares are held in an investor’s accounts.
Goldman Sach’s incoming letter doesn’t go that far. It contemplates centralized or persistent portals as a possible future “Program Maturation” feature – but its framework is focused on enrollment in the Goldman Sachs program. - Goldman Sachs accommodates employees and former employees: Goldman Sachs offers “Enrollment Enhancements” specifically aimed at current employees, former partners and former employees.
Goldman Sachs notes that current employees and partner alumni held more than 7.6% of its outstanding shares as of its latest annual-meeting record date. Current employees can enroll through an internal employer system – and it can promote the program through regular employee communications. Tesla doesn’t mention this concept. - Tesla allows enrollment to survive selling and later reacquiring the stock: Under Tesla’s framework, an issuer could allow an investor to establish a standing instruction for a particular account without having to opt in again if the investor sells all of the issuer’s shares and subsequently reacquires them. The investor would receive a notification after reacquiring shares and before the standing instruction is used again.
Goldman Sachs discusses multi-account and “householding” functionality as something that could happen in the future – but doesn’t expressly include Tesla’s sell-and-repurchase persistence feature. - Tesla makes “householding” a more developed feature: Tesla contemplates a standing instruction applying to all shares across all accounts under a shareholder’s name, as well as account-specific standing instructions that persist over time.
Goldman Sachs also contemplates enrollment covering multiple accounts on a householding or summary-processed basis, but characterizes this as an example of a possible future “Program Maturation” rather than an element of the initial program. - Their treatment of special matters is subtly different: Both programs let investors choose between having a standing instruction apply to either “all matters” – or “all matters except contested director elections and certain acquisitions, mergers or divestitures.”
However, the framework for the issuance of reminders differs. Goldman Sachs says investors who chose “all matters” will receive an additional reminder before a contested election or qualifying M&A transaction. Tesla says shareholders participating in its VIP will receive a reminder before any meeting involving a “special matter,” without limiting that reminder to investors who selected “all matters.” - Tesla contemplates enrollment at the time someone becomes a shareholder: Once a Hub exists and the required program communications have been filed, Tesla says investors could be offered enrollment when – or shortly after – they first become shareholders (or any later time while the issuer maintains the program). Goldman Sachs doesn’t mention this type of new shareholder onboarding mechanism.
Authored by
Broc Romanek