The United Brotherhood of Carpenters and Joiners of America asked the Securities and Exchange Commission to amend the current proxy requirement to eliminate the option for shareholders to “withhold” their vote in electing board members, 45-page petition.

The “withhold” vote “contributes to confusing and misleading proxy communications that threaten the integrity of director elections,” according to the May 20 document. The trade union is advocating for a majority vote standard, which requires a director to win a majority of votes to be elected, rather than the current plurality vote standard, which only requires a candidate to win more votes than a competing nominee. A substantial number of "withhold" votes “can sometimes influence future decisions by the board of directors concerning director nominees,” according to the SEC's explanation of proxy voting.

Board members who receive a majority of “withhold” votes submit a resignation letter for the board to consider, so that “withhold” votes have a practical effect—though not a legal one— on a director's term depending on whether or not the board accepts the tendered resignation, said the union's Director of the Corporate Affairs Department, Edward Durkin, who signed the letter. Companies use the "withhold" voting option to allow shareholders to symbolically oppose a nominee or as part of a governance policy rooted in post-election resignation, he said.

The proposed proxy would give shareholders an opportunity to vote "for" or to "abstain" on the bid of an individual nominee or all the nominees, according to the letter. "This ballot would accurately convey shareholders' options," said Durkin. 

Topics