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Ensuring that Shareholders Have a Meaningful, Effective Vote

Commissioner Kara M. Stein

Feb. 19, 2015

Opening Statement at the SEC’s Proxy Roundtable

Welcome, and thank you all for being here today for the SEC’s roundtable on the following two issues: the Universal Proxy and Retail Participation in the Proxy Process. I appreciate that so many of you have taken the time out of your busy schedules to be here, and I am looking forward to hearing the views of our broad array of panelists, as well as the audience. In addition, thanks to the Chair and to the Division of Corporation Finance, in particular Jenny Riegel, for organizing this event. As many of you know, I have been advocating for a roundtable on these important issues, and I appreciate the hard work that it represents.

Essentially, today’s roundtable is about how to give investors a meaningful and effective vote.

For example, shareholders who attend shareholder meetings in person can receive a universal ballot that includes the names of all candidates who have been nominated for the board —regardless of whether the nominees were put forward by management or by the shareholders. However, shareholders who do not attend meetings in person typically do not receive a universal ballot. These shareholders, in general, are limited to choosing from among either the company nominees or the shareholder-proponent nominees, but may not choose among all of the nominees. Should investors be treated differently based upon whether they are able to attend a meeting in person or vote by proxy, especially with advances in technology and communications?

One of the Commission’s roles in the proxy process is to help ensure that shareholders can intelligently exercise their right to vote.[1] Additionally, the Commission has the responsibility to make sure the proxy process functions “as nearly as possible, as a replacement for an actual in-person meeting of shareholders.”[2]

As we move into our first panel today, “the universal proxy” (not to be confused with proxy access), it is important to ask why, if shareholders at meetings are able to pick and choose from the full pool of candidates and the proxy card is supposed to replace in-person attendance, shouldn’t we have universal proxy cards? A universal proxy card would list both sides’ nominee lists, which would achieve this goal of approximating an in-person meeting and allow shareholders to vote for the candidate of his or her choice. If it can be done, why isn’t it done? Is the Commission doing its part to ensure that investors are able to fully exercise their right to vote? From there, it is important to consider if universal proxy cards have been effective elsewhere? Have any of the concerns posed in response to universal proxies come to fruition internationally? And, from a more technical side, would it be optional or mandatory for companies and shareholder proponents to include the opposing parties’ candidates on their materials? Should the rules vary depending on whether this is a short slate, majority slate, or full slate? What should that card or ballot look like? What type of information or disclosures should be included on it? In what order should candidates appear on the card? These are some of the important questions I hope we have a robust discussion about this morning.

Our second panel today will be focused on “retail participation in the proxy process.” It is interesting to note that there is limited data available regarding proxy voting decisions of retail shareholders. However, it is commonly accepted that retail investor participation is relatively low. This is concerning given that the right to elect and remove directors is at the heart of corporate governance.

Why is retail participation so low, and can it be improved? Would investor testing be a way to get insight into this area? How informed are shareholders who are voting? Are there new approaches to the proxy process that would increase participation? For example, what role could technology play to make the process more informed or to encourage more shareholders to participate? What should the Commission do to better empower retail investors?

As the Supreme Court emphasized, citing 1934 legislative history, “Fair corporate suffrage is an important right that should attach to every equity security bought on a public exchange.”[3] That is the heart of what our panels are about today. I look forward to the discussion this morning, and I encourage you to submit additional comments after the close of the roundtable to continue the discussion.

Thank you.

[1] See Tenth Annual Report of the Securities and Exchange Commission, Fiscal Year Ended June 30, 1944, at 29 (“Prior to the development of the Commission’s proxy rules,… [t]he stockholder was merely invited to sign his name and return his proxy without being furnished the information essential to the intelligent exercise of his right of franchise.”). See also Mills v. Electric Auto-Lite Co., 396 U.S. 375, 381 (1970), quoting H.R. Rep. No. 1383, 73d Cong., 2d Sess. 13-14 (1934) (“Fair corporate suffrage is an important right that should attach to every equity security bought on a public exchange.”).

[2] Facilitating Shareholder Director Nominations, Proposed Release No. 33-9046 at 9, available at Id. quoting Securit[ies] and Exchange Commission Proxy Rules: Hearings on H.R. 1493, H.R. 1821, and H.R. 2019 before the House Committee on Interstate and Foreign Commerce, 78th Cong., 1st Sess. 172 (1943) (statement of SEC Chairman Ganson Purcell)(“The rights that we are endeavoring to assure to the stockholders are those rights that he has traditionally had under State law, to appear at the meeting…”); Press Release, Sec. & Exch. Comm’n, SEC Votes to Propose Rule Amendments to Facilitate Rights of Shareholders to nominate Directors (May 20, 2009), available at

[3] Mills v. Electric Auto-Lite Co., 396 U.S. 375, 381 (1970), quoting H.R. Rep. No. 1383, 73d Cong., 2d Sess. 13-14 (1934).

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