As Liz recently blogged, the Texas Stock Exchange has proposed replacing the current broker discretionary voting system with a mandatory proportional voting framework for all uninstructed shares held by brokers on behalf of beneficial owners.
Here are seven things to know about the proposal:
1. End of Broker Discretion – Under the proposal, brokers would no longer be permitted to cast discretionary votes on uninstructed shares. Instead, every uninstructed share would be voted according to a mathematical formula based on the voting instructions actually received from other beneficial owners.
2. Elimination of the Routine vs. Non-Routine Distinction – The proposal would abolish the long-standing distinction between routine and non-routine matters, replacing it with a single, consistent voting methodology for every proposal submitted to shareholders.
3. Proportional Allocation of Votes – For each proposal, brokers would allocate uninstructed shares in proportion to the voting instructions received (e.g., if instructed shares vote 60% for and 40% against, uninstructed shares would be voted using the same ratio). Some brokers already vote uninstructed shares proportionally for NYSE/Nasdaq companies – so this concept is not entirely novel.
4. Voting Driven by Participating Shareholders – The Texas Stock Exchange says the proposal is designed to ensure that voting outcomes more accurately reflect the preferences of shareholders who actually submit voting instructions, rather than broker discretion.
5. Consistent Treatment Across All Proposals – By applying the same proportional allocation method to every shareholder vote, the proposal arguably would eliminate the proposal-by-proposal inconsistencies created by the current framework.
6. No Change to Shareholder Rights – The proposal emphasizes that beneficial owners would retain all existing voting rights. Shareholders who submit voting instructions would continue to have their votes counted exactly as directed.
7. Potential Benefits for Companies – The Texas Stock Exchange believes the new approach could improve the ability to reach quorum for shareholder meetings, while also reducing proxy solicitation costs since uninstructed shares would still be counted under the proportional voting formula.
Authored by
Broc Romanek