On January 25, 2012, the New York Stock Exchange issued an Information Memo to its members announcing new restrictions on the ability of brokers to vote customer shares on certain governance proposals without specific instructions.  NYSE had previously treated these as “routine” matters on which brokers could exercise discretion under Rule 452 when the proposal was supported by company management.  NYSE indicated that it is changing its approach on these matters in light of recent congressional and public policy trends disfavoring broker voting of uninstructed shares.

The matters on which brokers may no longer vote without specific customer instructions include proposals to:

·     Destagger a company’s board of directors,
·     Implement 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.

The new guidance does not affect the treatment of management proposals seeking shareholder ratification of the appointment of the independent auditor, which will continue to be treated as “routine.”  The NYSE has also left open the possibility that it will treat other management-sponsored governance proposals as “non-routine,” and we expect that it will.  As in prior years, the NYSE encourages companies to consult with the NYSE staff on the treatment of proposals for purposes of Rule 452.  Companies that have already submitted a preliminary proxy statement to the SEC containing disclosure describing NYSE’s prior approach to broker discretionary voting under Rule 452 should not consider it necessary to file a revised preliminary proxy statement, but could simply correct the disclosure before finalizing the proxy statement.