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CalSTRS-chaired SEC panel weighs in on Broadridge preliminary vote tally dispute

Recommendations from Dodd-Frank ‘Investor as Owner’ sub-committee

A Securities and Exchange Commission investor sub-committee chaired by Anne Sheehan, Corporate Governance Director at California pension giant CalSTRS, has made a set of recommendations in the wake of a furore last year over vote tallies at JPMorgan’s AGM that involved proxy voting services firm Broadridge.

The spat erupted in May 2013 when Broadridge, the dominant voting services firm in the US, abruptly stopped honouring requests from shareholders for information about how preliminary voting on their proposals was going.

The move came just days before a tricky AGM for JP Morgan, where shareholders were to vote on a proposal that would prohibit CEO Jamie Dimon from continuing as chairman.

Broadridge said at the time that it was asked to stop providing the information by Wall Street lobby group the Securities Industry and Financial Markets Association (Sifma).

It prompted the influential Council of Institutional Investors (CII), which represents investors with more than $3trn in assets, to demand action from the SEC, registering its “deep concerns” about Broadridge. CtW Investment Group, the shareholder advocacy group allied with US labour pension funds, spoke of “deeply troubling questions” about the fairness and impartiality of the proxy system.

Now a set of proposals drawn up by the Investor as Owner Sub-Committee that is chaired by Sheehan has been taken up by the SEC’s main Investor Advisory Committee (IAC), which was formed in 2012 under the Dodd-Frank Act to advise the SEC.

The Investor as Owner Sub-Committee engaged in “considerable analysis” of what’s seen as part of the “proxy plumbing issue”, including a presentation by Michael Garland, Assistant Comptroller for Environmental, Social and Governance at the New YorkCity Office of the Comptroller. It also engaged freely with Broadridge.

It’s recommended that the SEC direct Broadridge to once again tell shareholders that have filed proposals at companies how the early voting on those proposals is going.

Broadridge has continued to provide early vote updates on shareholder proposals to companies if they want it. Broadridge also says that this information can be shared with a proponent shareholder – but only if the company approves and the shareholder signs a confidentiality agreement.

The committee has recommended that the SEC “provide clear rules of the road, specifying that the obligation of impartiality extends not only to the distribution of proxy materials and the request for voting instructions, but also to the disclosure of preliminary voting information.”

Since May 2013, Broadridge has told only one shareholder what the preliminary vote count is on a motion filed before an AGM. In the six years before then, Broadridge shared this information with 11 shareholders.

Despite the limited requests for such information, CII Executive Director Ann Yerger told RI that Broadridge’s move was significant: “That statistic shows that many shareholders didn’t even know that they, through Broadridge, had access to such important information.” She added: “It is simply unfair that Broadridge is providing one side (the companies) and not the shareholders.” Yerger also said the SEC was not bound by the committee’s recommendations and that SEC Chair Mary Jo White would meet with the committee shortly on the issue.

Broadridge said: “If there is a concern that the (current) practice of providing interim voting information is inconsistent with that being impartial, Broadridge welcomes clarification from the SEC, whether that be through interpretive guidance or rulemaking.”