Follow Up: North Carolina Treasurer Urges Elimination of Brokerage Firms Voting of Client Shares

On June 11, 2007, we published an article entitled “Should Brokerage Firms Continue to Vote Their Clients’ Shares without Permission, Including for Corporate Directors?” State Treasurer Richard Moore of North Carolina has recently answered that question with a resounding “No!”

In a statement, Moore contends that allowing such votes thwarts corporate reform and prevents shareholders of a company from having adequate representation in director elections. Moore is also a board member of NYSE Regulation and called on SEC to approve an NYSE proposal that would change its Rule 452 to eliminate broker voting in all director elections.

Under the NYSE’s current rule, brokers may vote on “routine” proposals if the beneficial owner of the stock has not provided specific voting instructions to the broker at least 10 days before a scheduled meeting. The proposed change would end all voting of customer shares for directors by categorizing all such elections as “non-routine.”

Moore cites as an example a recent vote to elect Roger Headrick a director of CVS/Caremark, following a merger between CVS Corp. and Caremark Rx Inc. Headrick had been on Caremark’s board of directors and, according to Moore, was criticized for his role in the controversial merger. Moore said that had broker votes been discounted, Headrick “would have become the first major public company director to be unseated by shareholders pursuant to a ‘majority vote’ bylaw.”

“As shareowners, we continue to fight for a real voice and for strong governance measures that support long-term value,” Moore said, “but these broker votes are rubber stamps for management, thwarting real change and preventing shareholders’ voices from being heard.”

Our Law Firm contends that Brokerage firms should do more to encourage shareholders to vote their own shares, rather than to simply ask if they want their identity revealed to companies. The knee-jerk reaction to revealing ones identity is to just say no. Brokerage firms claim they do a public service by helping companies obtain a quorum. Yet, these firms can also use their power to vote their clients’ shares as clout over companies to get or keep these companies as investment banking clients.

Shepherd Smith and Edwards represents institutional and individual investors in claims against investment firms. If you have lost in your account at an investment firm contact us to arrange a free confidential consultation with one of our attorneys.

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More information on the hearing on investor protection and market oversight is available from the House Hearings Website

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