Brokers will not be allowed to vote proxies of uninstructed shares in elections of directors of U.S. companies, according to action taken today by the SEC.
The SEC approved by a 3-2 vote a proposed New York Stock Exchange rule to eliminate the uninstructed broker voting. NYSE rules require SEC approval.
The rule change is expected to take effect Jan. 1, said an NYSE spokesman, pending confirmation with the SEC.
The Council of Institutional Investors praised the SEC decision. “Counting uninstructed broker votes is akin to stuffing the ballot box for management as broker votes almost always are cast in favor of management's candidates for board seats,” Ann Yerger, CII executive director, said in a statement.
Colin Diamond, partner in the capital markets group with the law firm of White & Case, said in an interview the amendment could affect management's ability to elect its directors at companies that have adopted a majority-vote requirement for election of directors.
Also today, the SEC approved proposing rules that would enhance corporate governance disclosure. The proposals include a requirement under certain situations that a company “provide information about how its overall compensation policies create incentives that can affect the company's risk – and the management of that risk,“ according to an SEC statement.
The proposals also include requiring, under certain circumstances, reporting fees paid to and types of services of compensation consultants used by companies.
Among other proposed rules, one would require a company to disclose how its leadership structure was created, such as having the same person hold the positions of chairman and CEO. Also, companies would be required to disclose proxy-voting results within four business days of the meeting. Currently, companies might take months before reporting results, according to an SEC statement.
A comment period for the proposed rules will be open for 60 days after they are published in the Federal Register, which could be later this month.