The most recent issue of Carl and Peder Hagberg’s “The Shareholder Service Optimizer” is full of gems as always. Including this sound reminder:
“Many publicly traded companies—and often their counsel as well—overlook the requirement to execute the Ballot of the Appointed Proxies, sometimes referred to for short, as the “Master Ballot.” Please note that the term “Master Ballot” is something of a misnomer, in that it implies a single, “master document” – which is NOT THE CASE if other entities are soliciting proxies separately from the company. In such cases, each such entity must submit its own Ballot – of its own Appointed Proxies – in order to legally cast the votes that run to them.
A proxy card is not a vote; it is an authorization granting the designated Proxy Committee the authority – and the duty – to vote on a shareholder’s behalf, as each shareholder directs. If a proxy card is signed, and some or all of the “boxes” are left unchecked, they will be voted by the Proxy Committee as the issuer has recommended.
The Ballot of the Appointed Proxies is the definitive legal instrument that formally casts all votes assigned by shareholders to the management Proxy Committee – and if other entities are soliciting proxies, to THEIR Appointed Proxies. To be valid, it must be signed by at least one member of the Proxy Committee.
Ideally, all such forms should be filed with the Inspector of Elections before the Annual Meeting begins – and all must be in the Inspectors’ hands before the polls officially close.
For more than 50 years, we have advised clients to sign and file the Ballot of the Appointed Proxies in advance of the Annual Meeting. In addition to ensuring votes will be properly cast, a properly signed Ballot allows a meeting to be “concluded” – rather than “adjourned” – in the event of a power outage or other disruption… as long as a quorum and sufficient votes to pass the proposals the management wishes to see passed are present.
The importance of the Ballot of the Appointed Proxies was underscored by the court’s decision in The Stilwell Group v. First Financial Northwest, Inc. (2012). In that matter, our Inspector of Elections (Ray Riley) determined that only 850 out of approximately 8 million claimed votes were valid – and would otherwise have carried the day – due to the company’s failure to properly file its Master Ballot to vote the proxies that had been granted to it.
Among numerous other parties, the Inspector was sued personally based on his ruling. After a lengthy and costly legal process, the court ultimately upheld the ruling, reaffirming a core principle of corporate governance: ‘Proxies are not votes. A proxy is an authorization to vote; the Ballot of the Appointed Proxies is the mechanism by which those votes are actually cast.’
And, oh yes, thanks to the naïve newbie the proxy solicitor sent to the Meeting, they were sued too – and had to sell the business to pay the judgment.”
