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Published: Friday, 3/12/2010

Rule governing voting of shares to be amended


As this year's shareholder-meeting season opens, the dwindling cast of bit players could be even smaller than in years past.

That's because the New York Stock Exchange is amending a rule governing the voting of shares held by a broker even though the broker's clients are the owners.

In the past, those brokers had to ask clients how to vote them at stockholder meetings. If they didn't get instructions, brokers could vote them as they pleased. They typically voted in line with the wishes of management, said Robert Morris, a lawyer at the Reed Smith firm who specializes in securities law.

This change affects only votes on "nonroutine" matters: changes in stock compensation plans, shareholder proposals, and, most important, the election of directors. On these matters, brokers can vote shares only if they receive instructions from clients.

Because many shareholders fail to provide instructions, experts worry that organized shareholders could more easily influence the outcome of elections.

Some believe that declining shareholder turnout has been fueled in part by Securities and Exchange Commission initiatives to reduce the costs of providing shareholders with written material in advance of the meetings.

Robert Folinus, a vice president of BNY Mellon Shareowner Services, said per-shareholder costs for printed materials can be $2 to $6, and postage can add $2.50 to $3.50 per shareholder.

The SEC for the past two years has given companies the option of sending stockholders a one-page letter informing them that proxy materials are available, either online or by calling for paper copies.

More than 1,300 companies exercised that option last year and saved an estimated $239 million, according to Broadridge Financial Solutions, a company that provides services including helping companies with shareholder communications.

Broadridge also found that fewer investors voted when they didn't get the materials the old-fashioned way.

The Block News Alliance consists of The Blade and the Pittsburgh Post-Gazette. Len Boselovic is a reporter for the Post-Gazette.

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