No Quorums At Meetings Because Directors Failed To Vote: Our Tips To Fix

As noted here earlier, there was a very noticeable decline in the number of companies that had to adjourn their Shareholder Meetings in first-half 2023 for lack of a quorum on the appointed date and time.

At two of the Meetings where our Inspectors of Election served, the shortage was due entirely by the complete lack of voting by Directors – who controlled roughly 30% of the shares outstanding! In both cases, their custodian banks said they’d shut off their voting apps and neither the company, the Directors nor their contacts at their custodians could find anyone who knew HOW to get their votes into the hopper.

Happily for them, our IOEs were able to accept an emailed statement from each custodian that (a) voting had indeed closed and (b) that the Directors were indeed entitled to vote a specific number of shares, which, the Directors averred – and as the numbers showed they had not voted –  which the IOEs were willing to take in the absence of the unattainable Legal Proxy - basically saving the day.  Here are our tips to avoid this ever happening to you:

• The very first thing you should do when gearing up for your Meeting is to understand the composition of your shareholder base – and to look at all large concentrations of voting power – INCLUDING the holdings of your Directors - which, especially in smaller and newer companies but sometimes in mega-caps too - are often considerable.
• ALWAYS remind Directors by the mailing date – ideally with a follow-up in writing – to be sure to vote their proxies – not just to help assure a quorum, but to minimize “close calls” on items that you want to see approved – or disapproved.
• Make sure that you – and the Directors too – know exactly where their shares ARE: How many shares may be in registered form and how many custodial accounts they may have – and with whom. Then review exactly what they need to DO (promptly sign and return a proxy for registered shares and/or promptly vote the Voting Instruction Forms they receive from custodians, with online voting being the ideal way.)
• You MAY want to remind them how costly it can be to have to adjourn and reconvene the Shareholder Meeting if there is a chance you’ll miss your marks without their votes.