Virtually every public company is required by their State charter, or by their bylaws, to have one or more Inspectors of Election to oversee and certify the voting at their annual meetings. The majority of companies still tend to use their transfer agents to do this - but over the past five years, more and more companies are looking for Inspectors who are completely independent: Who can serve as a reliable check-and- balancing system with respect to a company’s proxy tabulators, who are often not the transfer agent these days.
There is still a surprising but fast-dwindling number of public companies that use their own employees, retirees, or retirees from their outside law and public accounting firms. One firm we know used a priest, a nun, a rabbi, and an AME minister (honest!) to oversee and bless the final tabulation. Lovely people, of course, but people who knew nothing at all about proxies, much less about the increasingly complex “proxy plumbing systems” - much less the court-tested “rules of proxies.”
Every year we still see a few companies that get sold on using their proxy solicitors to sanctify the final vote – votes they got paid to round up and sometimes to tally up too, and where sometimes, there is a bonus for big pro-company votes. Obviously, any of the prior conditions create clear conflicts of interest where certifying the vote is concerned.
Old traditions like these are changing fast, and for very good reasons: As more and more proxy matters are decided by a hair’s breadth each year, it becomes ever more important for the Inspector to be able to pass a ‘sniff test” where “independence” and know-how, and the due-diligence that is actually performed are concerned. It really IS time to rethink.
Our advice: If you think you may have close or contentious matters on your ballot, or if investors are voting on one or more “material items” – like a merger, recapitalization or a bylaw change that requires shareholder approval – think hard, about having one or more expert and truly independent Inspectors become a part of your official process.
Also: Make sure that any firm or individual inspector you may pick has rigorous, written procedures in place – and actually follows them – and that the inspector(s) can stand up and be effectively counted themselves if challenged.
(Please note too that we have numerous articles about Inspectors of Election on our website)
If you think you may have matters on your shareholder meeting ballot where the outcomes could turn out to be close or contentious…
If investors are voting on one or more “material items” – like a merger, recapitalization or a bylaw change that requires shareholder approval…
If you simply want to follow “best practices” when it comes to ‘inspecting the election’ and certifying the final results…
If you want to be sure that any firm or individual inspector that you and your board appoint has rigorous procedures in place – and actually follows them – and that the inspector(s) can stand up and be effectively counted themselves if challenged…
Please think about having one or more expert and truly independent Inspectors as a part of your company’s official shareholder meeting team.
Please visit our website to review some “Questions and Answers about Inspectors of Election”... “What, Exactly Should Inspectors Be Inspecting?”… “Who's Counting Those Votes, Madam Chairman?”…and to review the profiles of our current team of Inspectors.