Trillium Demonstrates Leadership on Profound SEC Change for Corporate Board Elections
On Wednesday July 1, the Securities and Exchange Commission (SEC) took the very important step of voting to eliminate broker discretionary voting for director elections. This rather arcane sounding rule change is actually central to efforts to hold boards of directors more accountable to shareholders and the stakeholders they represent. Until this change, if a broker in possession of a shareholder’s proxy had not received the shareholder’s instruction on how to cast his or her votes for directors, the broker would decide how to cast the vote. Invariably it would be cast in accordance with management’s recommendation – i.e. for the company’s nominee for director. Now, those votes will be left unvoted and at companies which require nominees for director to obtain a majority of votes it will become more difficult to meet the threshold.
Corporate board elections have often been regarded as so devoid of meaning as to resemble Soviet era voting. The Council of Institutional Investors once refered to the situation as “stuffing the ballot box for management.” This SEC decision, however, is an important step in changing that situation and could result in more shareholder revolts against corporate boards. As one respected commentator, Broc Romanek, put it, “this change is the biggest of the reforms that companies face – bigger than proxy access, say-on-pay, etc.” The change, proposed by the New York stock exchange, garnered the support of many large institutional investors. Trillium, however, was the only SRI firm to come out publicly in support of the proposal and file a comment letter with the SEC. We are proud that we contributed to this effort and our letter is part of our ongoing commitment to push for policy improvements in Washington that will allow us at Trillium to hold companies accountable for their profound impacts on the planet and society.
You can find our comment letter to the SEC here.