Management votes by default

Brokerage firms hold roughly 80% of listed company shares (NYSE only?) and if the owners do not instruct their brokers how to vote their shares, the brokerages vote in favor of management proposals. As a result, reports Gretchen Morgenson, "brokers control an estimated 25 percent of the shareholder vote at the typical annual meeting." (The estimate comes from the London-based organization Governance for Owners.)

The NYSE had proposed to prohibit the practice before next spring's annual meetings but has now decided to postpone the change until 2008 to give companies, especially those that now require directors to receive a majority of votes cast, more time to prepare. Some observers, including at least one member of the working group that formulated the proposed rule change, expressed concern that the rule change had been postponed because of pressure from opponents, which include the Business Roundtable and the Society of Corporate Secretaries. The Roundtable opposes the change "because it would require educating their shareholders on proxy voting issues, yet corporations cannot communicate directly with those who hold their shares at brokerage firms, for example."

Gretchen Morgenson, "Big Board Delays Plan On Voting," New York Times (natl. ed.), 3 October 2006, C1, C6.