Investor Bulletin:

Voting in Annual Shareholder Meetings -What’s New in 2012

Over the next few months, investors can expect 

to receive proxy materials for annual shareholder 

meetings or a related notice advising shareholders how 

they can access these materials. Shareholder voting 

typically takes place at the annual shareholder meeting, 

which most U.S. public companies hold each year 

between March and June.

There are three new or continuing developments this 

year:

•	 Shareholder Proposals on Proxy Access. 

Shareholders may be asked to vote on 

shareholder proposals to establish procedures 

to include shareholder director nominations in 

company proxy materials. 

•	 Uninstructed Broker Votes. Restrictions 

have increased on the circumstances in which 

brokers may vote on behalf of clients who do 

not send in voting instructions. That means 

that brokers will be casting discretionary votes 

on a narrower range of items this year.

•	 Say-on-pay Votes. Starting last year, most 

public companies were required to have 

advisory say-on-pay votes and to choose how 

often to hold such votes in the future. This 

year, shareholders will vote again to approve 

executive compensation at those companies 

that have chosen to hold annual advisory sayon-pay votes.

Shareholder Proposals on Proxy Access

Typically, the board of directors nominates board 

candidates, whose names appear in the company’s 

proxy materials for director elections. Shareholders do 

not have an automatic right to have their own director 

nominees included in these proxy materials. Where 

shareholders do have this ability, the names of director 

candidates nominated by qualified shareholders appear 

in the proxy materials alongside the names of the 

candidates nominated by the board of directors. This 

process gives shareholders direct access to the proxy 

materials for nominating directors and is often called 

“proxy access.”

This year, as a result of amendments to the shareholder 

proposal rule, eligible shareholders have the right to 

have proposals that call for the adoption of proxy 

access procedures included in company proxy 

materials. (Note that the right to submit shareholder 

proposals about proxy access procedures is different 

from the right to nominate director candidates.)

Shareholder resolutions on proxy access may either 

be advisory or binding, and investors have filed both 

kinds this year. An advisory resolution approved by 

shareholders leaves the final decision to the company’s 

board of directors on whether to adopt a proxy access 

procedure. A binding resolution takes effect once 

it is approved by shareholders. (Depending on the 

company, approval may require more than a simple 

majority of votes.)

Investor Assistance (800) 732-0330 www.investor.gov

1
Court Decision on Proxy Access Rule

In August 2010, the SEC adopted a new rule 

that would have required companies to include 

eligible shareholders’ director nominees in 

company proxy materials in certain circumstances. 

The rule was contested in court, however, and in 

July 2011, the U.S. Court of Appeals for the D.C. 

Circuit struck down this rule. 

Uninstructed Broker Votes

The New York Stock Exchange (NYSE) allows 

brokers to vote on certain items on behalf of 

their clients, if the broker has received no voting 

instructions from those clients within 10 days of the 

annual meeting. These votes are called uninstructed or 

discretionary broker votes. Brokers are only allowed to 

cast uninstructed broker votes on “routine” items, and 

the scope of routine items has narrowed over the years. 

This year, the NYSE announced that brokers may no 

longer cast uninstructed votes on certain corporate 

governance proposals. These include proposals to 

de-stagger the board of directors (so that all directors 

are elected annually), adopt majority voting in the 

election of directors, eliminate supermajority voting 

requirements, provide for the use of consents, provide 

rights to call a special meeting, and override certain 

types of anti-takeover provisions. Previously, the 

NYSE had permitted a broker to cast uninstructed 

votes on these proposals if they had the support of the 

company’s management.

Two other important restrictions on discretionary 

broker voting have been in effect since 2010. First, 

brokers can no longer cast uninstructed votes in 

the election of directors (except for certain mutual 

funds). Second, brokers are prohibited from voting 

uninstructed shares on executive compensation 

matters, including say-on-pay votes.

As the ability of brokers to vote uninstructed 

shares shrinks, the importance of shareholder 

voting grows. If shareholders do not vote, they 

cannot expect their broker to vote for them on an 

increasing range of issues.

Say-on-pay Votes

The say-on-pay rules took effect last year for most 

companies with two exceptions. First, smaller 

reporting companies have until 2013 to comply. The 

second exception concerns companies that borrowed 

money under the Troubled Asset Relief Program 

(TARP) and have not yet paid it back. TARP 

companies are required to hold annual say-on-pay 

votes until they pay back all the money they borrowed 

from the government, at which time they will become 

subject to the say-on-pay rules applicable to other 

companies.

The rules require three non-binding votes on 

executive compensation:

•	 Say-on-pay Votes. Companies must 

provide their shareholders with an advisory 

vote on the compensation of the most 

highly compensated executives. The votes 

are non-binding, leaving final decisions on 

executive compensation to the company and 

its board of directors. Companies are now 

required to disclose whether and, if so, how 

their compensation policies and decisions 

have taken into account the results of their 

most recent say-on-pay vote. This disclosure 

generally appears in the compensation 

discussion and analysis section of the proxy 

statement. Shareholders can review this year’s 

proxy statements to find out how companies 

have responded to last year’s say-on-pay votes.

Investor Assistance (800) 732-0330 www.investor.gov

2
•	 Frequency Votes. Companies also were 

required last year to provide their shareholders 

with an advisory vote on how often they 

would like to be presented with the say-onpay votes—every year, every second year, 

or every third year. Like say-on-pay votes, 

frequency votes are non-binding. After 

each advisory vote on frequency, companies 

must disclose their decision as to how 

frequently they will hold advisory sayon-pay votes. Companies would typically 

provide this disclosure either in a Form 

8-K or Form 10-Q, both of which are filed 

with the SEC. Many companies provide 

this information shortly after their annual 

meeting. These forms are publicly available on 

the Commission’s website at www.sec.gov/

edgar/searchedgar/webusers.htm. Companies 

typically file several 8-Ks in a year. Look for 

those referring to Item 5.07.

•	 Golden Parachute Arrangements. 

The term, “golden parachute” generally 

refers to compensation arrangements and 

understandings with top executive officers 

in connection with an acquisition, merger 

or similar transaction. When companies 

seek shareholder approval of a merger or 

acquisition, they are required to provide 

their shareholders with an advisory vote to 

approve, in the typical scenario, the disclosed 

golden parachute compensation arrangements 

between the target company and its own 

named executive officers or those of the 

acquiring company. The company is not 

required to conduct such a vote, however, if 

the golden parachute disclosures were included 

in executive compensation disclosures subject 

to a prior say-on-pay vote. 

Additional Information

For our Investor Bulletin: Say on Pay 

and Golden Parachute Votes, visit 

investor.gov/news-alerts/investor-bulletins/

say-pay-golden-parachute-votes.

For our Spotlight on Proxy Matters, visit 

www.sec.gov/spotlight/proxymatters.shtml.

For our Using Edgar - Researching 

Public Companies, which provides 

information on how to search for company 

documents, such as Forms 8-K, in the 

SEC’s EDGAR database, visit investor.

gov/researching-managing-investments/

researching-investments/using-edgarresearching-public-companies. 

For additional educational information, see 

the SEC Office of Investor Education and 

Advocacy’s website for investors, www.

investor.gov.

The Office of Investor Education and Advocacy 

has provided this information as a service to 

investors. It is neither a legal interpretation nor 

a statement of SEC policy. If you have questions 

concerning the meaning or application of a 

particular law or rule, please consult with an 

attorney who specializes in securities law.

Investor Assistance (800) 732-0330 March 2012

3