The New York Stock Exchange (NYSE) tightened rules setting forth the types of corporate governance proxy proposals upon which brokers may vote. The exchange said it is making the amendments in light of recent legislative action.
On Jan. 25, 2011, the NYSE announced changes to Exchange Rule 452, which governs when brokers may vote customer shares without specific client instructions. In the past, the exchange has ruled certain corporate governance proposals as “broker may vote” matters for uninstructed customer shares when the proposal in question is supported by company management.
“More recently, the approach to broker voting of uninstructed shares has narrowed through changes in exchange rules as well as through legislative action,” the NYSE wrote.
For instance, the exchange amended Rule 452 in 2010 to prohibit brokers from voting uninstructed shares in the election of directors other than directors of an investment company registered with the Securities and Exchange Commission under the Investment Company Act. The Dodd-Frank Act codified this approach. In addition, Dodd-Frank specifically prohibits brokers from voting uninstructed shares on executive compensation.
“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,” the NYSE wrote.
With the rule change, proposals that the exchange previously ruled as “broker may vote” including, for example, proposals to de-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 are now treated as “broker may not vote” matters.
The rule change took effect immediately.
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