Shareholder Voting in California: I Don’t Want To Express A Preference, But I Want My Vote To Count
I’ve always considered majority voting to be a profoundly illogical concept that evidences a fundamental misunderstanding of the mechanics of shareholder voting.
As an initial matter, there is the problem of terminology. For example, Section 7.2 of CalPERS’ Global Principles of Accountable Corporate Governance states: “Therefore, CalPERS recommends that corporations adopt the following corporate governance principles affecting shareowner rights . . . Resignation for any director that receives a withhold vote greater than 50% of the votes cast should be required.” (Emphasis added). When a shareholder returns a proxy card marked so as to withhold authority, the shareholder is most certainly not voting. She is in fact declining to authorize someone else (the proxy holder) to go to the meeting and vote.
Many majority vote bylaws or policies provide that a director is not elected (or must tender her resignation) if she does not receive a majority of the votes cast. A shareholder who withholds proxy authority to vote for a nominee (or nominees) is not casting a vote either against (or for) the nominee(s). This is also true when a shareholder fails to execute a proxy card or voter instruction form and does not vote in person at the meeting.
So, do proxies that are marked so as to withhold authority to vote for a nominee send any sort of message at all? CalPERS’ policy seems to assume that they do. But, is the message indifference or opposition? Is a shareholder who returns a proxy withholding authority sending a different message than the shareholder who doesn’t return a proxy or voter instruction form? Is the message any different when a shareholder attends the meeting but does not cast a ballot? How does anyone discern with any certainty the intent of these shareholders?
In an article devoted to abstentions, Hofstra Law School Professor Grant M. Hayden had this to say about abstentions in large public elections:
The sense of citizen duty may wax and wane with the perceived importance of an election. The list of reasons why an individual voter may decide to vote or abstain is, indeed, quite long.
That said, none of the theories of voter abstention holds that a decision to abstain expresses anything other than indifference among the ballot alternatives.
Abstention: The Unexpected Power of Withholding Your Vote, 43 Conn. L. Rev. 585, 594 (2010).
Interestingly, Nevada has for nearly 40 years required the Secretary of State to count and report to the public the number of “none of these candidates” (NOTC) ballots cast for each elective office. Although counted and reported, these ballots cannot be counted in determining the winner among the named candidates. NRS 293.269. Recently, this statute was challenged based on the argument that unless NOTC votes are given “legal effect” in some manner, those voters are “disenfranchised” and so the NOTC option cannot appear on the ballot at all. In Townley v. Miller, 2013 U.S. App. LEXIS 13921 (9th Cir., July 10, 2013), a panel of the Ninth Circuit Court of Appeals found that while the merits of this argument was “questionable”, it did not need to decide them because none of the plaintiffs had constitutional standing under Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (I trust that all of my former Administrative Law students will recognize this seminal standing decision).