Independent Steering Committee Newsletter
Volume 6, December 2014
The matters discussed in this Newsletter were addressed during meetings with the Staff of the Securities and Exchange Commission (SEC) in Washington DC on October 22 and with the Staff of the New York Stock Exchange (NYSE) in New York City on November 6, 2014.

About the Steering Committee:

The Broadridge Independent Steering Committee (“the Steering Committee”) was formed in 1993 to serve as an independent oversight body charged with monitoring the performance, voting accuracy and readiness of Broadridge and its predecessor firm in conducting the US street name proxy system on behalf of the nation’s banks and brokers.

The Steering Committee, organized from within the securities industry with the encouragement of the SEC, consists exclusively of persons who are neither current nor former employees of Broadridge ("BR"). The members represent the four industry groups involved in the proxy process:  issuers, institutional investors, brokers and custodian banks.

The purpose of this Newsletter is to share with a wider audience the developments that are shaping the US proxy system and to encourage broad participation in promoting the efficiency and integrity of that system.

Stephen P. Norman
President, S.P. Norman & Company, LLC


Comments or suggestions may be sent to

Regulatory Matters

Interim Vote Report Developments

Recent developments in the area of reporting interim or preliminary shareholder voting reports include a recent letter from the Council of Institutional Investors (CII) requesting that the SEC prohibit the “selective disclosure” of interim vote reports. The CII seeks clarification of the impartiality requirement under the Proxy Rules to suggest that brokers or their agents furnish interim vote reports to everyone, not just to management of the issuer. In a similar vein, the SEC’s Investor Advisory Committee (IAC) on October 9 recommended that the SEC staff take the steps necessary to assure that the impartiality exemption granted to brokers under the Proxy Rules be conditioned on  brokers acting in an impartial fashion throughout the proxy process, including the disclosure of preliminary voting information, and that neither the broker nor its agent be subject to impermissible conflicts of interest that impair the ability of the intermediary to act in an impartial manner.

A member of the SEC staff noted that under current interpretations, the impartiality exemption applied to the solicitation of proxies and was silent on the subject of providing  voting results, although the staff would seek to better understand this area. Representatives of Broadridge voiced their desire to remain neutral on this issue.

It was noted that procedures currently exist for vote solicitors  to request and receive interim vote status information upon obtaining appropriate confidentiality agreements. The Committee encouraged issuers and institutional investors to explore areas of consensus in connection with the language of the confidentiality agreements that would facilitate the disclosure of interim vote results to shareholders who are running exempt solicitations in connection with proxy proposals.

Universal Ballots

The Committee discussed another  initiative recommended by the IAC and the CII. That recommendation called for the SEC to relax the “bona fide nominee” rule in order to provide proxy contestants with the option to use a single ballot containing the names of both management and dissident candidates. Proponents of the single or Universal Ballot felt that it minimized the risks of incomplete or inaccurate voting in contested elections. Broadridge stated that they had the capability to process Universal Ballots and that shareholder voting in three Canadian shareholder meetings had successfully used Universal Ballots.

It was noted that SEC Chair Mary Jo White had stated that the Universal Ballot was an important issue for U.S. investors but one that is tied to a range of other critical issues. She stated that the Commission will hold a roundtable early in 2015 on this and a number of other proxy issues.

Virtual Shareholder Meetings

Broadridge reported that approximately 93 companies held Virtual Shareholder Meetings (VSMs) in 2014. Of these, 46% were “hybrid”, or a combination of a physical and an on-line meeting, while 54% were on-line only. Of these meetings, 83% of the meetings used an audio broadcast only, while 17% used a video and audio broadcast, The Committee was reminded that for a company to host a VSM, the shareholders must be able to vote during the meeting, see or hear the proceedings contemporaneously, and be able to ask questions or make remarks which can be heard by other shareholders. Broadridge then described a VSM that they conducted during 2014 that experienced organized cyber-attacks and the use of disruptive technology in an attempt to “trash” the meeting. By using extensive countermeasures, Broadridge was able to repel the attacks and the client’s VSM was successfully conducted.

Technology Update

Load Testing and the Use of Distributed Systems
    Broadridge described the series of load tests that it runs throughout the year against the proxy Internet applications to assure that system response times are always within acceptable levels, especially in the face of continuing increases and periodic spikes in end user volumes. Essential to meeting these demands are the use of distributed systems and load-shifting methods to be able to handle peak demands under all conditions. In addition, extensive disaster recovery testing is performed to assure business continuity in times of power-outages, storms or emergencies.

    Data Security

    Broadridge outlined the heightened efforts to protect the data which Broadridge handles during the proxy process. These efforts include the use of data leakage prevention technology to reduce the potential for malicious or accidental loss of confidential information, and application and network security programs to proactively identify and resolve vulnerabilities in application and server environments. In addition, Broadridge uses intrusion detection and prevention services to detect intrusions at the network perimeters and personal identifiable information protection measures to block the release of social security numbers, share amounts and other personal information. Given the increased threats from virus attacks, spyware, malicious codes and compromised hosts, Broadridge has allocated increased resources and management to this area.

    End-to-End Vote Confirmation

    Update of Working Group

    The Steering Committee received a report on the 2014 End-to-End Vote Confirmation Pilot Program in which 26 US corporations participated. Approximately 490,000 shareholder accounts received vote confirmation during this program. The vote confirmation process revealed that a nominal amount of shares (.11%) were not reconciled and therefore not voted. Some members of the working group questioned the return on investment of further enhancements to the reconciling process for such a small number of un-voted shares. However, the institutional investor members of the Steering Committee expressed the importance of achieving full and precise end-to-end vote confirmation for all US corporations, regarding exactness in voting as an essential element in establishing the certainty and integrity of the shareholder voting system.

    2014 Proxy Season Statistics

    Review of 2014 Proxy Season

    Broadridge presented a Report of Key Statistics and Performance Ratings for the 2014 proxy season. The number of shareholder meetings processed during the 2014 season increased from 3,990 meetings in 2013 to 4,071 meetings in 2014.The number of shares processed increased by 4.3% to 409.1 billion shares in 2014 from 391.7 billion in 2013.The average quorum achieved in 2014 rose to 85.7% from 84.3% last year. Voting on the two Internet platforms - ProxyEdge and -  totaled  93.6% of all votes cast, with the percentage of shares voted via paper ballots falling to 5%  and via telephone to 1.6% of total votes.

    Other 2014 trends included a continuing reduction in the turn-around times between proxy material receipt and distribution, which went from an average of 2.21 days in 2013 to 2.19 days this year, the elimination of a record high  66% of all physical mailings and the continued growth in estimated savings to issuers to over $904 million vs. the estimated costs of printing and mailing full proxy packages. Retail shareholders continue to utilize their mobile devices for voting proxies. In 2013, 826,000 share positions were voted via mobile devices; in 2014, the number increased by 70% to 1.5 million positions. Many of these positions were voted by first-time voters.

    Retail Voting Initiatives

    Enhanced Broker Internet Platform Update

    In 2013, as part of its comprehensive proposal on proxy fees, and in recognition of the potential that EBIPs pose for promoting retail voting, the NYSE approved a $.99 incentive fee for each position converted from a full package to e-delivery, payable to brokers who have installed an EBIP. By the end of 2014, 15 U.S. brokerage firms had installed EBIPs which permitted direct voting in approximately 35% of the nation’s retail accounts. Anecdotal evidence suggests  that the greater convenience of EBIP voting  resulted in consistently  higher retail voting levels in the 2014 proxy season. Additional “investor mailbox” brokers could become EBIP brokers if and when they activate the voting functionality on their websites.

    Advanced Voting Instructions

    The Committee discussed an October 5  Wall Street Journal Op-Ed piece that suggested that permitting retail investors to provide Advance Voting Instructions(AVI) to their brokers, much in the way that institutional investors currently register their voting preferences with their voting agents, could be an effective means of increasing  retail voting levels.  In 2014, only about 29% of shares held by individuals were voted in corporate elections. The concept of AVI had been first mentioned in the 2010 SEC “proxy plumbing” release, although other priorities have so far pre-empted further Staff discussion of the concept. Additional research within the brokerage industry may be called for to determine the feasibility of providing retail investors using AVI with  cost-effective  voting options in addition to the basic “For, Against and Abstain” choices.
    Top Redesign

    New Format

    The platform redesign was undertaken in 2014 to make the online voting experience more appealing to the retail investor and to make the site simpler and easier to navigate. Starting with the initial email that the investor receives, the new format may include the logo of the investor’s broker and a highlighted reference to the company holding the annual meeting. Proxy materials, voting and instructional information will be on one page and the confirmation page will include the ability to vote other positions held at the same broker without logging in again with a separate control number. In September 2014, Broadridge conducted usability testing, and the feedback has indicated that the new site was easy to read and use, and voting seemed simpler and more intuitive than on the old site. The redesigned platform is expected to roll out in 2015.
    Table Of Contents
    Steering Committee Members

    Thomas Broderick
    State Street Corporation

    Anne Chapman
    Capital Group

    Lawrence Conover
    National Financial Services, LLC

    Steven Dapcic
    Pershing, LLC

    Michael Garland
    The New York City Comptroller's Office

    Stacey K. Geer
    Primerica, Inc.

    Michael Kania
    The Bank of New York Mellon

    Philip Larrieu
    California State Teachers' Retirement System

    Gloria Lio
    Goldman, Sachs & Company

    Mark S. Lyon
    Webster Financial Corporation

    James Monahan
    Morgan Stanley & Co.Inc.

    Stephen Norman
    S.P. Norman & Company, LLC

    Chad L. Norton
    Capital Group

    William J. O'Shaughnessy
    Quest Diagnostics, Inc.

    Carol V. Schwartz
    American Express Company

    Timothy Sheeley
    JP Morgan Chase

    Chad Spitler

    Darla Stuckey
    Society of Corporate Secretaries & Governance Professionals

    Joseph C. Swanson
    The Northern Trust Corporation