Broadridge Financial Solutions Inc.
("Broadridge"), the largest provider of
proxy distribution and tallying services for North American
companies, recently announced a change to its U.S. policy on
providing interim voting results during proxy contests. Under the
new policy, Broadridge will only provide each proxy contest
participant (i.e. the corporation and the dissident shareholder)
with interim voting reports on the shareholders supporting that
participant. It will no longer provide comprehensive interim
reports on shareholders supporting other participants, unless both
sides agree to share interim voting results.
This new policy, which mirrors the current approach in Canada,
will significantly effect not only U.S. issuers but also Canadian
issuers with U.S. shareholders. Whereas the availability of
complete preliminary voting data previously enabled U.S. proxy
contest participants to monitor for a quorum, predict likely
outcomes, detect errors in voting data and direct efforts to
solicit investors that had not yet voted, U.S. participants will no
longer be able to tell whether an investor has voted for the other
side, if at all. Although the new policy contains an exception,
under which Broadridge will provide full voting data to both sides
if they both agree to such disclosure, proxy contest participants
may very well refuse to cooperate for strategic reasons. As a
result, participants in proxy contests can expect to see a request
to share interim voting results (on both sides of the border) added
to the standard "proxy protocol" letter (typically
submitted by dissidents that includes requests that, while not
legally required, are made to ensure the "fairness" of
the process, such as the appointment of an independent chair, an
agreement on the form of proxy used at the meeting and the right to
review both sides' proxies prior to the meeting).
The new Broadridge policy thus introduces new uncertainties into
the U.S. proxy contest landscape by weakening participants'
abilities to predict proxy voting outcomes. Broadridge did not
provide reasons for the policy change.
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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