The New York Stock Exchange LLC and NYSE Amex Equities LLC (collectively, the NYSE), on January 25, 2012, issued Information Memo Number 12-4 regarding the application of Rule 452 to certain corporate governance proposals. Rule 452 prohibits brokers that have not received specific client instructions from voting customer shares in "nonroutine" matters. The rule applies to all brokers, so its impact will not be limited to NYSE-listed companies; brokers voting on NASDAQ-listed company or unlisted company proposals are also subject to Rule 452.
Rule 452 already prohibited uninstructed brokers from voting in director elections and on say-on-pay and other compensation related proposals. Effective upon its release, the NYSE's Information Memo expanded the list of what constitutes "non-routine" matters to include certain types of corporate governance proposals, such as proposals to:
- de-stagger the board of directors;
- require majority voting in director elections;
- eliminate supermajority voting requirements;
- provide for the use of consents;
- provide rights to call a special meeting; and
- override certain anti-takeover provisions.
These are merely "examples" of proposals that the NYSE now deems non-routine. The NYSE is likely to deem other corporate governance proposals similarly affected by the new application, but will decide on a case-by-case basis. The new application of Rule 452 is likely to make it more difficult to garner sufficient support for corporate governance proposals, particularly where these proposals require the majority approval of all outstanding shares.
A copy of Information Memo Number 12-4 can be found at: http://www.nyse.com/ nysenotices/nyse/information-memos/pdf?memo_id=12-4 .
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