A Proxy Is Not A Vote And Why It Matters

As discussed in this prior post, the Securities and Exchange Commission recently proposed rule amendments to implement the Dodd-Frank Act’s executive compensation advisory votes mandates. Regrettably, the SEC’s proposal perpetuates the common misconception that executing a proxy is the same as voting. For example, the SEC’s proposed Rule 14a-4(b)(3) refers to “[a] form of proxy which provides for a shareholder vote on the frequency shareholder votes to approve the compensation of executives . . .”.

The California General Corporation Law makes a clear distinction between a proxy and a vote by defining a proxy as “a written authorization signed or an electronic transmission authorized by a shareholder or the shareholder’s attorney in fact giving another person or persons power to vote with respect to the shares of such shareholder”. Cal. Corp. Code § 178. The agent is called a “proxyholder”. See Legislative Comment to Cal. Corp. Code § 604. California’s definition is not out of the mainstream. In fact, its statutory definition of “proxy” is substantively the same as that enunciated by the Delaware Supreme Court: “[T]he relationship between grantor and recipient of a proxy is one of agency . . .”. Moran v. Household Int’l, Inc., 500 A.2d 1346, 1355 (Del. 1985).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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