Inspectors of Election play a crucial role in ensuring the integrity of voting processes at annual meetings of public companies, as mandated by state charters or bylaws. Traditionally, many companies have relied on their transfer agents for this function, but a growing trend over the past five years is the increasing preference for completely independent inspectors. This shift is driven by a desire for a reliable check-and-balance system, particularly as proxy tabulators, often distinct from transfer agents, are involved.

While some companies still use their own employees, retirees, or individuals from external legal and accounting firms, this practice is diminishing. Anecdotal instances, such as using a priest, nun, rabbi, and AME minister, are charming but underscore the need for individuals with expertise in proxies and an understanding of the evolving complexities in “proxy plumbing systems” and the court-tested “rules of proxies.”

Certain companies continue the practice of entrusting proxy solicitors with the certification of the final vote, potentially introducing conflicts of interest. However, these old traditions are rapidly changing for valid reasons. With proxy matters often hanging by a thread, the Inspector’s ability to pass a ‘sniff test’ regarding independence, know-how, and thorough due diligence is becoming increasingly critical. It’s time for a reevaluation.

Recommendations include considering expert and genuinely independent Inspectors, especially in cases of close or contentious matters or when significant decisions like mergers, recapitalizations, or bylaw changes requiring shareholder approval are at stake. It’s essential to ensure that selected inspectors have well-defined, written procedures that they consistently follow. Moreover, these inspectors should be capable of standing up effectively if their credibility is challenged.

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