TheCorporateCounsel.net

October 12, 2006

A Deeper Look: How Contested Elections are Inspected

I hope you caught last week’s webcast – “Understanding Overvoting and Other Tricky Voting Issues” – and if not, it’s never too late as the audio archive is available. One of the panelists, Bill Marsh, President of IVS Associates (the largest independent tabulator), responded to my recent blog that wondered why it would take so long to finalize the results of the recent contested election at Heinz. Here is some education from Bill:

IVS was the tabulator and inspector of election for Heinz and was the focus of questions regarding the length of the tabulation process. Such questions are not unusual and, for the most part, inspectors are used to it. Some things to bear in mind:

– Proxy fights often take several weeks, and even longer, for inspector certification.

– The inspectors’ tally begins after the polls have closed (according to IVS practices). No additional votes are accepted by the inspectors under any circumstances.

– In proxy contests, record holders (those who hold certificated shares) are generally mailed three or more proxy cards from each side and sometimes have the ability to vote electronically(telephonic or Internet). Of course, how many times they vote really does not matter as far as the outcome is concerned; only the latest-dated valid vote counts. The point is that the tabulator spends many hours sifting through proxy votes (both hard copy and electronic voting files) to find the last-dated valid instruction for all the record holders. Some of the larger contests have well over 25,000 record holders.

Also, there is the “street vote” (beneficial holders through banks and brokers) – as administered mostly by ADP. This part of the tabulation involves gathering data from printouts of often more than a hundred pages and entering it into a database. If there are overvotes (a bank/broker voting more shares than assigned by the depository), the inspectors contact the bank/broker (usually through ADP) to get them resolved (per Delaware Law, which IVS follows if other states are silent).

When the inspectors have completed the preliminary tabulation, attorneys and solicitors from each side of the contest have the right to review all votes and present challenges to the inspectors. This process can last anywhere from several hours to several days – several weeks even.

The entire process is time consuming and tedious. Also, speed is the not the major concern- accuracy and the integrity of the voting results are. Shareholders and advocates should take comfort in the time and diligence that is put into the tally and getting it right so the holders votes are what carry day.