The Top-Three Things You Should Fear to Hear at Your 2019 Meeting of Shareholders

If there is one thing that will strike fear into the heart and mind of an unprepared Meeting-Chair, it is this question from the floor: “Who counted those votes, Madam Chairman”…and secondly, “how do we know the results are correct?”

Your editor-in-chief has heard this question on many occasions during his long career, where he has supervised Inspectors of  Election at literally tens of thousands of shareholder meetings, and served at hundreds of them himself. And it’s a question we will be hearing more and more often as proxy votes on contentious proposals become increasingly close.

Worse yet, however, is when the speaker directly challenges the reported results - and even worse yet…turns out to be correct.

The days of allowing an Inspector of Election to be ‘served up to you’ by a service supplier are over

Over the years the OPTIMIZER has reported on dozens of incidents like this - at big companies like Yahoo …and Apple (twice!) - and at many smaller companies - like the one where the State of Wisconsin Investment Board challenged the reported outcomes for the approval of an employee stock plan where they knew their vote was not in the tally because they had “counted the house” ahead of time with other large investors…Or the Canadian company where the company’s proxy solicitor was accused of falsifying telephone-votes so the company would win on a comp-proposal, and was quickly found guilty…Or the incident we reported last year, where the prior year’s Inspector of Election incorrectly declared two of the candidates for 18 board seats to be among the winners, when they were not. And this year, of course, we had the huge and high-profile proxy fight at P&G where it took multiple attempts for the Inspectors to come up with numbers that, while still suspect, both sides were ultimately able to agree upon.

As we have been reporting regularly, more and more meeting matters are being decided by razor-thin margins these days. And clearly, the level of skepticism about “proxy plumbing” and proxy counting issues has also increased - where investors of all sizes and shapes are concerned. (See the article immediately following this one for more.) 

Against this background, there is an increasing - and an urgent need, we say - to have a well-developed action plan, and a carefully worded script in place where your Inspectors of Election are concerned. The days of allowing an Inspector of Election to be simply ‘served up to you’ by a service supplier are over, we think - at least where the savviest companies are concerned.

Please take a few minutes to go to our Inspectors of Election site where you will find links to a variety of other articles on this subject. Also, please be sure to review the profiles of the CT Hagberg LLC Team of Independent Inspectors of Election and to note that we are ready, willing and able to serve alongside any of the major transfer agents and proxy tabulating agents - and where we already have most, and will have all of the required due-diligence procedures in place and ready to go before your meeting convenes.

OUR ADVICE TO ISSUERS AS THEY PREP FOR THEIR 2019 MEETINGS:

• First and foremost, make sure that YOU will know how the Inspector or Inspectors were chosen - AND that they have been properly appointed by the board, or by a proper designee, in accordance with your Company Charter…AND that a reasonable amount of due diligence has been done on your part before officially appointing an Inspector - to be sure they will be up to any challenge.
• Be sure that your Inspectors have rigorous inspecting processes and procedures in place - AND that they will be able to stand up under scrutiny, and to clearly and succinctly describe their procedures if challenged.
• Most important, your Meeting Chair should know who the Inspectors of Election are - and that the Chair - or the Inspectors themselves - will be able to briefly summarize what the Inspector(s) actually did to “Inspect”…and what if anything further will be done to check on “close” or contested outcomes and to report back.