In "Charles Schwab No Longer Utilizing Proportionate Voting," Alliance Advisors discusses the potentially significant impact of Charles Schwab's announcement last year that it will no longer apply proportionate voting to routine ballot items at shareholder meetings. In lieu of using proportionate voting for uninstructed shares - which resulted historically in Charles Schwab voting uninstructed shares proportionately to how its other underlying holders voted, the huge retail broker will now take no action - i.e., abstain from voting, on uninstructed shares for all proposals.
The change in approach is expected to adversely impact companies that skew toward higher retail ownership and that depend on broker discretionary and proportionate voting of uninstructed shares to attain their necessary meeting quorum, as well as the overall quorum and vote turnout on routine ballot items for companies with higher institutional ownership. The situation may be further exacerbated by Charles Schwab's acquisition of TD Ameritrade - expected to close in the second half of this year - if TD Ameritrade follows suit.
Alliance Advisors recommends companies: (i) identify how many shares were proportionately voted and cast by Charles Schwab at their most recent shareholder meeting and determine how to make up for the expected corresponding vote reduction; (ii) consider and aim to mitigate the impacts on the meeting quorum and routine ballot items; and (iii) monitor the TD Ameritrade acquisition and associated position on uninstructed shares.
Access additional information & resources on our Proxy Plumbing, Individual (Retail) Investors and Annual Meeting/Proxy Statement pages. This post first appeared in the weekly Society Alert!