Uncertainty continues as Broadridge flip-flops over its policy on the disclosure of interim proxy tallies in a proxy contest. In early February 2014, Broadridge announced a new policy that a company and shareholder proponents would only receive results of votes cast in favor of their respective proposals. A few days later, Broadridge reversed course and announced that it would not implement that policy but that “[b]oth sides of a proxy contest will continue to receive interim voting updates for their own and each other’s ballot.”
The policy updates follow last year’s controversy over Broadridge’s disclosure of interim proxy tallies during a contested shareholder proposal at JPMorgan. Historically, Broadridge had disclosed interim vote tallies to the company and to proponents of shareholder proposals who used Broadridge to distribute proxy soliciting materials. The interim vote tallies were reportedly leaked to the public and, days before the annual shareholder’s meeting, Broadridge declined to share interim vote tallies with the shareholder proponents, citing its contractual obligation to broker clients who had expressed concern over the practice. The policy was later reviewed by the Broadridge Steering Committee, which noted in a July 2013 newsletter that Broadridge was taking a neutral stance on the policy but was contractually obligated to cease its practice in response to concerns received from brokers about the early release of their voting data.
Broadridge has been free to set its own policies on the matter without regulatory oversight, and several groups have called on the Securities and Exchange Commission (SEC) to intervene. The JPMorgan controversy incited U.S. Senator Charles Schumer (D-NY) to write a letter to SEC Chairwoman Mary Jo White urging the SEC to create “clear rules of the road with respect to the dissemination of voting tallies,” and the Council of Institutional Investors, which represents corporate, public and union employee benefit plans, wrote a letter to the SEC to express its “deep concerns” over Broadridge’s reversal of its vote-sharing policy. The Broadridge Steering Committee also suggested that the SEC should provide clarity on the issue.
Some experts argue that early voting results are insignificant given that the votes are not actually cast until the meeting, and shareholders have the opportunity to change their votes up to the time of the meeting. Others argue that withholding early voting information from shareholder proponents gives companies an unfair advantage in a contested proxy solicitation by allowing companies to target proxy solicitations in the days leading up to a final vote. Broc Romanek also raises confidentiality concerns, questioning whether public leaks of interim vote tallies could sway shareholder votes.
In response to the debate, shareholder proposals have been submitted for the 2014 proxy season for “enhancing confidential voting” policies, and the ISS has issued a policy of evaluating such proposals on a case-by-case basis. As shareholder activism continues to rise, these policy questions have the potential to become critical to the outcome of high-profile proxy contests. Given Broadridge’s significant influence over the proxy process (reportedly processing 85% of shares voted in the U.S. and 72% of shares voted outside the U.S.) and lack of regulatory oversight, this may be an area ripe for SEC guidance to provide clarity and consistency in the proxy process.