To the jubilation of proxy statement drafters and voting tabulators everywhere, late last week, the SEC gave notice of an NYSE proposal to amend the definition of “votes cast” for items that require shareholder approval under NYSE Rule 312.07 (e.g., equity compensation plans, certain stock issuances). This White & Case memo explains (also see this Cooley blog):
The NYSE’s proposal would amend Section 312.07 of the NYSE Listed Company Manual to provide that a company must calculate “votes cast” on a proposal subject to that section “in accordance with its own governing documents and any applicable state law.”
Effectively, this means that the NYSE would change its current policy of requiring companies to count abstentions as votes “against” a proposal subject to NYSE rules – even when applicable state law would consider abstentions to have no effect on the outcome of the vote. The Exchange has observed that its current policy has historically caused confusion among listed companies, and the Exchange believes that this rule change will avoid any complications among issuers and shareholders when different voting standards are applied under the NYSE rule, a company’s governing documents, and/or applicable state laws. The rule change will also result in NYSE being consistent with Nasdaq in their treatment of abstentions.
The memo cautions that even if this rule change is approved, you’ll still have to carefully review disclosure about voting standards and ensure votes are properly tabulated in light of numerous standards under state law and companies’ governing documents.
There’s a 21-day comment period for the proposal, and the SEC will either approve or disapprove of the rule change within 45 days of publication in the Federal Register.
– Liz Dunshee