In yesterday's post, I discussed why the Council of Institutional Investor's blanket policy eschewing the counting of abstentions may be neither good nor legal. CII, however, isn't the only proponent of not counting abstentions. As Broc Romanek reported in his Proxy Season Blog, a Seattle based group by the name of Investor Voice SPC is submitting shareholder proposals advocating a simple majority vote rule. (If you're wondering about the SPC included in Investor Voice's name, it is an initialization of social purpose corporation, a new form of for-profit corporation organized under Chapter 23B.25 of the Revised Code of Washington.)
In January, Intel Corporation filed this no-action request seeking exclusion of the following proposal submitted by Investor Voice:
RESOLVED: Shareholders of Intel Corporation ("Intel" or "Company") hereby ask the Board o f Directors to amend the Company's governing documents to provide that all matters presented to shareholders shall be decided by a simple majority of the shares voted FOR and AGAINST an item (or, "withheld" in the case of board elections). This policy shall apply to all matters unless shareholders have approved higher thresholds, or applicable laws or stock exchange regulations dictate otherwise.
Intel seeks to exclude the proposal from its proxy statement based on the following:
- Rule 14a-8(b) and Rule 14a-8(f)(1) because the Stockholders failed to provide an adequate statement of intent to hold the requisite shares through the date of the 2014 Annual Meeting;
- Rule 14a-8(f) because Investor Voice is not a stockholder and failed to provide adequate proof that it is acting on behalf of the Stockholders under Rule 14a-8(b);
- Rule 14a-8(i)(3) because the Proposal is false and misleading in violation of Rule 14a-9; and
- Rule 14a-8(i)(3) because the Proposal is impermissibly vague and indefinite so as to be inherently misleading.
Investor Voice's proposed supporting statement argues that "Abstaining voters do not follow management's recommendation to vote AGAINST a shareholder-sponsored item. Ignoring this intent, Intel arbitrarily counts all abstentions as if siding with management." (emphasis in original). Investor Voice's argument overlooks the fact that shareholders usually vote on management as well as shareholder proposals. Not counting abstentions actually makes it easier for management proposals to pass. If Investor Voice's premise is that shareholders who do not follow management's recommendations (i.e., to vote FOR management's proposals), oppose those proposals, then it follows that abstentions should be counted as votes AGAINST.