The Securities and Exchange Commission voted on July 1 to eliminate broker discretionary voting in uncontested board elections. Under the new rule, which goes into effect in January, brokers will no longer be able to cast votes for shareholders who don't return voting material unless instructed to do so.
The change is part of an SEC initiative to make board elections more transparent. The agency is also considering new rules that would make it easier and less expensive for shareholders to add board nominees to a company's proxy voting materials. (See this video for details on proxy access.)
As for eliminating the broker non-vote, O'Melveny & Meyers partner Steve Epstein says considering brokers hold up to 80% of shares in U.S. corporations, the change could have a dramatic effect on companies that require a majority vote for board nominees.
