A. Understanding the Voting Process
- What is the voting process?
- Who regulates the voting process?
- Which stockholders are entitled to vote at
a stockholders' meeting?
- What is a "depository"?
- Who is a "record holder"?
- Who is a "beneficial owner"?
B.
Understanding Electronic Voting
- What is electronic voting?
- When can a company allow stockholders to
vote electronically?
- Can stockholders revoke their votes electronically
if they are permitted to vote electronically?
- Can a company use electronic voting in a
proxy contest?
- When must a proxy statement precede
or accompany an electronic communication to a stockholder?
C.
State Law Considerations for Electronic Voting
- When does a company have to follow state
law to allow stockholders to vote electronically?
- How does state law impact companies who want
beneficial owners to vote electronically?
- Which states have laws that permit companies
to allow their record holders to electronically vote?
- What if a company is incorporated in a state
that is silent or does not permit electronic voting of proxies?
- What should a company do if it receives multiple
proxies from a stockholder that have conflicting voting
instructions?
D.
Corporate Governance Document Considerations in Electronic Voting
- How can a company determine if its corporate
governance documents permit electronic voting?
- How can a company draft a charter or
bylaw provision to allow for electronic voting?
E. Self Regulatory Organization Considerations in Electronic Voting
- What are the SRO regulations regarding
electronic voting?
F. Securities Law Considerations in Electronic Voting
- What is the SEC's guidance relating to electronic
voting?
- Are beneficial owners permitted to provide
voting instructions electronically under the federal securities
laws?
G.
Matters for Companies to Consider before Allowing Electronic
Voting
- Why might a company not want to allow electronic
voting?
- How much does electronic voting cost a company?
- What factors should a company consider to
ensure a voting system is reliable?
- How can companies or their service providers
authenticate electronic proxy cards?
- How can a company use an intranet to allow
employees to vote their employer stock?
- How much lead time does a company need to
implement electronic voting on an intranet?
- Can companies use e-mail addresses to deliver
proxy material or to notify shareholders when proxy material
is available on a Web site?
- Does a company need to obtain a legal opinion
before allowing electronic voting?
- How long should a company retain a record
of its electronic votes?
- Who should handle e-mail or telephonic
questions regarding electronic voting?
H.
Who is Allowing Electronic Voting
- How is electronic voting growing?
- Which companies are allowing electronic voting?
- Does electronic voting typically impact whether
a company will achieve a quorum?
- How many stockholders use electronic voting
when allowed to do so?
- How long has electronic voting been around?
- Who pays for electronic voting?
I.
Who are the Service Providers for Electronic Voting
- Who are service providers that have
electronic voting systems to assist companies?
A. Understanding the
Voting Process
What is the voting process?
Actually it's a fairly complicated process.
A company must ensure that all persons entitled to vote (both
record holders and beneficial owners as of a record date) have
an opportunity to vote after they have had an ample period of
time to review proxy material and return proxy cards - and even
revoke their votes if they desire.
The complication is that the process involves
a company soliciting proxies through several layers of intermediaries
- these intermediaries are involved because of the various different
ways that securities can be owned. See more @ what is beneficial
ownership. These layers of intermediaries makes it impossible
for a company to directly communicate with all of its stockholders
- since many stockholders remain anonymous to the company.
The voting process typically involves:
- Depositories provide an omnibus proxy to a company that
states the number of shares held by "participants" in the
depositories. See more @ what is a "depository"
- "Participants" (primarily brokers and banks) hire proxy
soliciting agents to obtain voting instructions from the
beneficial owners who have bought stock through them (in
"street name").
- Tabulation agents tabulate voting instructions and facilitate
providing these results to the company from the participants
(or from beneficial owners who provided their voting instructions
directly to the company).
The voting process is similar
to the process for proxy solicitation - but there are some differences.
Note that record holders vote
by using "proxies" - beneficial owners vote by using "voting
instructions."
Who regulates the voting process?
A mixture of both the SEC and the state
in which a company is incorporated.
The
SEC has regulations that govern how and when companies must
provide disclosure to stockholders when they solicit proxies
- as well as what a proxy card should say.
State law governs the validity of the proxies
themselves. See more @ state law considerations.
Unlike
"proxies," it can be difficult to determine which laws govern
the solicitation and the validity of "voting instructions" for
beneficial owners - as a contractual matter, the governing document
in the beneficial owner's relationship with its record holder
probably controls.
Note that the Department of Labor imposes the fiduciary duties
on certain plan trustees to vote on behalf of plan assets and
participants.
Which stockholders are entitled to
vote at a stockholders' meeting?
Record holders who hold their stock as
of a "record date." This date is determined by a company under
its corporate governance documents, which should comply with
the law of the state in which it is incorporated.
Most state laws require that a record
date be set within a range of 10 to 60 days before a stockholders'
meeting - and most companies have a bylaw provision that tracks
what the governing state law permits.
What is a "depository"?
An entity that holds legal title to securities
on behalf of its "participants."
Depositories execute an omnibus proxy in
favor of their participants shortly after a company's voting
record date - this is necessary to enable participants to have
the power to vote shares, since depositories hold the legal
title of the securities. Under an omnibus proxy, participants
are considered the actual record holders of the securities under
the federal securities laws (primarily brokers and banks). See
more @ instructions to vote from beneficial owners to participants.
Depositories are used to facilitate
the adminstrative burden when securities are traded (i.e. when
trades are made, the securities are moved electronically among
the participant's accounts within the depository's system) -
but depositories don't wield any voting power.
Source: The
Depository Trust Company is the primary depository in the U.S.
(it uses the record name of Cede & Co.) and it holds title
to the vast majority of the securities of almost every U.S.
public company. Rule 14b-2(b)(i) requires that depositories
execute omnibus proxies to transfer voting authority within
5 business days after the record date - this includes a power
of substitution allowing record holders to transfer voting authority
to other record holders in the event they trade securities.
Who is a "record holder"?
A person or entity who is listed as a
stockholder in the company's books and records.
In most cases, record holders are the brokers
and banks that investors hire as their agents to buy stock -
these investors then are the "beneficial owners" of the stock
(also known as "street name" owners). See more @ what is a beneficial
owner.
It's
not uncommon for a broker or bank to be an agent or fiduciary
of other intermediaries who effectively are "layers" between
a beneficial owner and a record holder. In other words, there
may be multiple layers of brokers between the beneficial owner
of a stock and the broker who actually is the record holder
on a company's books and records.
Who is a "beneficial owner"?
A person or entity who hires an agent
- typically a broker or a bank - to buy or hold stock for them.
These investors have the true economic risk of owning the stock
and the ultimate voting authority is vested in them.
Beneficial owners also are
known as buying stock in "street name."
Many
employees buy securities through an employer sponsored benefit
plan in which a trustee is the record holder and the employees
are beneficial owners (but note that under some employee stock
purchase plans, employees are the record holders).
Under the NYSE rules, if the beneficial
owner customers don't return voting instructions, a broker has
the discretion to vote any shares held by its customers for
"routine" matters (such as uncontested elections of directors).
If a broker doesn't bother to vote these shares, they are known
as "broker non-votes."
Companies
must disclose in their proxy statements how they intend to vote
"broker non-votes" and the effect of these votes on the company
under state law.
Note
that "beneficial owner" is defined differently in other contexts.
Source: Rule
452 of the NYSE Manual provides brokers with discretionary voting
authority if their customers do not respond. "Beneficial owner"
is defined differently in Rule 13d-3 than under most state proxy
laws. Under state law, the focus is who has the power to vote.
In comparison, Rule 13d-3 uses a disjunctive test (which means
that a stock can be considered owned by more than one person
at a time) to include all persons that possess the power to
vote or direct the voting of the stock and any person with investment
power over the stock. Item 21(b) of Schedule 14A requires companies
to disclose how they intend to use and the effect of "broker
non-votes." 
B. Understanding Electronic
Voting;
What is electronic voting?
When a record holder or beneficial
owner votes through electronic media - such as e-mail or telephone,
through a Web site or proprietary software.
Electronic voting often results in votes
being cast earlier - which gives management an early indication
of what the final results will be. However, the use of electronic
voting doesn't necessarily change how many votes are cast. See
more @ electronic voting's impact on quorums.
When can a company allow stockholders
to vote electronically?
After it has gotten comfortable that
the following matters are not impediments:
- its corporate governance documents allow it
- the laws of the state in which the company is incorporated
allow it (just a concern for electronic voting by record
holders, not beneficial owners)
- the applicable SRO regulations allow it
- its tabulation agent has authentication procedures that
satisfy applicable state law
- its tabulation agent provides sufficient security procedures
to comply with the SEC's guidance
- it intends to make appropriate disclosure in its proxy
statement and on its proxy card (unless the company is incorporated
in Delaware). See more @ disclosure in proxy materials regarding
electronic voting.
Can stockholders revoke their votes
electronically if they are permitted to vote electronically?
Yes - unless the stockholders' meeting
is about to be held and the company has a reasonable electronic
revocation deadline.
Note
that state law requires companies to allow stockholders to revoke
their votes at any time up until the polls close during a stockholders'
meeting.
As required
by e-voting providers, most companies allow stockholders to
electronically revoke their proxies only up until the day before
the stockholders' meeting - the cut-off helps them to avoid
administrative processing problems associated with late electronic
revocations (after the cut-off, revocations must be made at
the meeting).
In most cases, electronic voting is a batch cycle process -
not a real time process - similar to paper voting.
Can a company use electronic voting
in a proxy contest?
Yes - electronic communication can facilitate
the solicitation process.
However, electronic voting in this type of
contested situation may be risky for a company - since the opposition
can wait until the last minute to vote a big block of stock
(or change votes), thereby surprising incumbent management.
In fact, ADP disables electronic voting options for beneficial
owners in contested solicitations because most companies are
unwilling to be the test case regarding the validity of electronic
votes in contested solicitations. See more @ online proxy contests.
When must a proxy statement precede
or accompany an electronic communication to a stockholder?
If the communication relates to a solicitation
of a vote (except for certain communications discussed below)
- even if the company still only allows paper voting.
Electronic delivery of a proxy statement
can satisfy the requirement to deliver a proxy statement - and
under the SEC's guidance, electronic communications regarding
a vote can be linked to a posted proxy statement and be considered
delivered together. See more @ electronic delivery of proxy statements.
Solicitations that are exempt from the
proxy statement delivery requirement - and thus don't have to
be preceded by a proxy statement - include:
- public speeches,
- regularly disseminated radio or TV, and
- regularly disseminated newspapers or magazines.
It's unknown if this exemption
applies to regularly disseminated e-mail or Web publications
- since the SEC has not addressed whether e-zines or similar
Internet publications are eligible for this exemption.
Source: Rule
14a-3(a) requires the delivery of proxy statements before a
proxy solicitation. Rule 14a-3(f) exempts the regularly publicly
disseminated information listed above from this requirement.
C. State Law Considerations for
Electronic Voting
When does a company have to follow
state law to allow stockholders to vote electronically?
If the company wants to allow record holders
to electronically vote. But state proxy laws do not impact electronic
voting by beneficial owners. See more @ impact of state law
on beneficial owner voting.
Record holders can electronically
vote proxies if the state in which the company is incorporated
has laws that permit it - since state law governs whether a
proxy confers the proper authority for someone else to vote.
State law may require manual signatures on
a proxy card or authentication of proxies - or may be silent
on these topics. If a state statute is unclear as to either
of these topics, it can effectively prevent electronic voting
- since there is sparse caselaw to provide guidance. Although
it's still unclear, the E-SIGN Act may preempt the ability of
states to require manual signatures. See more @ the E-SIGN Act.
State proxy laws typically
impose only a few requirements on creating valid proxies, such
as requiring that the proxy must designate who has the authority
to vote the stock or ensuring that there is some evidence that
the proxy is authentic.
Numerous
state proxy laws have authentication provisions which follow
Section 7.22 of the Model Business Corporation Act - which deems
an electronic proxy to be the equivalent of a manually signed
proxy if there is some "reasonable indication" that it was authorized
by the stockholder.
How does state law impact companies
who want beneficial owners to vote electronically?
It doesn't. The ability of beneficial
owners to vote is not restricted by state law - since state
law only applies to proxies, not voting instructions. As a result,
ADP-ICS is able to allow beneficial owners to vote electronically,
regardless of a company's state of incorporation.
Note that state law does apply to electronic
delivery of stockholders' meeting notices - even for beneficial
owners. See more @ electronic delivery
of stockholders' meeting notices.
Which states have laws that
permit companies to allow their record holders to electronically
vote?
About 20 states have laws flexible enough
to permit some form of electronic voting for record holders
- ranging from narrow discrete mediums (such as telephonic voting)
to broad statements encompassing any type of electronic media.
As more states have felt pressure
to modernize their corporate governance laws, this number has
grown. The remaining states have laws that either require manual
proxy signatures or authentication of proxies - or are silent
as to whether electronic proxy voting is permitted.
The states that permit some form of electronic
proxy voting include :
Although it's still unclear, the E-SIGN Act may preempt the
ability of states to require manual signatures. See more @ the E-SIGN Act.
What if a company is incorporated
in a state that is silent or does not permit electronic voting
of proxies?
It still can take advantage of new technology to modernize its
voting process by:
- allowing beneficial owners to electronically provide
voting instructions (see more @ lack of state law restrictions
on beneficial owners)
- sending proxy cards electronically to record holders
and having them print, manually sign and return them via
postal mail.
- if a state law is silent, research whether other companies
incorporated in the same state have permitted electronic
voting - and if so, contact their in-house lawyers and ask
on what authority was the electronic voting permitted (such
as based on a state agency concurrence or outside counsel
legal opinion).
Source: An example of how courts can reach different decisions
when confronted with new voting mediums is from the mid-1980s
- when some courts upheld the use of telegraphic proxies (known
as "datagrams") and some struck them down. Compare Dynamics
Corp. of America v. CTS Corp., 643 F.Supp. 215 (N.D. Ill. 1986)(datagrams
upheld) to Parashalle v. Realist Inc., 567 A.2d 19 (Del. Chauncery
Court 1989)(datagrams struck).
What should a company do if it receives
multiple proxies from a stockholder that have conflicting
voting instructions?
If it appears that the stockholder authorized both proxies on
their face - they are both presumed valid and the last executed
proxy controls (so the earlier one is considered revoked).
The challenge is determining which proxy was executed last -
this can be particularly difficult if one proxy is sent via
postal mail and the other is sent electronically. Although unclear
under most state laws, "execution" of an electronic proxy likely
will be considered the time that it was sent.
To determine when an electronic proxy is sent, the Web form
through which a proxy vote is sent should have a header that
time stamps the transmission - this is important since a court
may not allow extrinsic evidence to be considered to resolve
questions regarding conflicts between proxies. In addition,
a company can address this issue by taking a position in a policy
and applying it consistently.
D. Corporate Governance Document Considerations
in Electronic Voting
How can a company determine if its
corporate governance documents permit electronic voting?
By reviewing its bylaws and articles of incorporation to ensure
that electronic voting is permitted.
If these documents provide that proxies must be "signed," "written"
or delivered by "mail" - they should be amended before record
holders are permitted to electronically vote.
Note that corporate governance documents typically do not address
voting instructions - so beneficial owners still can electronically
vote, even if the company's charter or bylaws restrict the ability
of a company to allow record holders to electronically vote.
How can a company draft a charter
or bylaw provision to allow for electronic voting?
Normally, companies that desire flexibility use broad amendments
such as - "electronic transmission of proxies is allowed to
the extent permitted by state law."
Although the E-SIGN Act may preempt the ability of companies
to require manual signatures under state law, this new federal
law probably doesn't affect any restrictions in a company's
bylaws. See more @ the E-SIGN Act.
E. Self Regulatory Organization Considerations
in Electronic Voting;
What are the SRO regulations regarding
electronic voting?
There really aren't any SRO regulations regarding e-voting.
The NYSE and NASD regulations impact electronic voting only
indirectly - by regulating electronic communications and when
proxy material must be delivered.
Under NYSE regulations, brokers can vote for the shares that
they hold in street name if they don't receive instructions
10 days before the meeting (known as the "10 day" rule). This
is only for noncontroversial matters that are fully disclosed
in the proxy statement - brokers cannot vote these shares for
controversial matters, such as for mergers and acquisitions
and other matters that may substantially affect the rights of
stockholders.
The NYSE requires that its broker members forward proxy material
to beneficial owners and provide them with an opportunity to
vote - the beneficial owners then can return voting instructions
to either the company or the broker.
F. Securities Law Considerations in
Electronic Voting
What is the SEC's guidance relating
to electronic voting?
It's principally disclosure guidance - since the validity of
proxies is a state law matter.
The SEC also has provided limited guidance on security and authentication
procedures for voting. See more @ voting security and authentication.
If a company allows electronic voting, the SEC believes that:
- its proxy statement should describe the voting procedures
as well as the validity of the procedures under applicable
state law - including highlighting any open issues relating
to electronic voting under state law, and
- its proxy card also should describe the voting procedures
- unless the company is incorporated in Delaware (since
the SEC staff informally has stated that it believes that
electronic voting in Delaware is sufficiently established).
- if a proxy statement is selected for review by the SEC
staff, they may ask for a legal opinion regarding the validity
of state proxy laws that are new, ambiguous or untested.
Source: The SEC staff's voting disclosure guidance is in "Proxy
Rules No. 17" of the Telephone Interpretation Manual, which
interprets Item 21 of Schedule 14A and Rule 14a-9 to require
proxy statement and proxy card disclosure regarding electronic
voting. The SEC staff first stated that electronic voting is
permissible if permitted under state law in the no-action letter,
Disclosure and Procedural Developments (available February 15,
1996).
Are beneficial owners permitted to
provide voting instructions electronically under the federal
securities laws?
Yes. Beneficial owners can extend their electronic delivery
consents to cover electronic processing of their voting instructions
- so long as they receive both:
- the URL of the posted proxy materials, and
- the record holder's Web site or e-mail address through
which voting instructions are to be sent.
Note that it's unusual that the SEC addressed this issue because
processing of voting instructions is not a disclosure issue
- but perhaps the SEC addressed this issue to fill a regulatory
void since voting instructions do not appear to be covered by
state law (other than under contract law).
Source: The SEC's guidance relating to the ability of beneficial
owners to extend their delivery consents to voting is in Example
3 of Release 33-7288 (May 9, 1996).
G. Matters for Companies to Consider
before Allowing Electronic Voting
Why might a company not want to allow
electronic voting?
Concerns about whether an electronic voting system has adequate
security and authenticity. See more @ determining voting system's
authenticity.
The initial set-up for an electronic voting system for record
holders occasionally is paid by a service provider, but normally
costs a few thousand dollars (in comparison, the cost for ADP's
electronic voting system for beneficial owners is not directly
paid for by companies). See more @ costs of electronic voting.
Stockholder voting is an important corporate governance matter
and the publicity of a hacked system could be disastrous - and
in extreme cases, may require a company to repeat its stockholders'
meeting. However, this risk appears limited because there are
no reported cases of hacked or insecure voting systems.
How much does electronic voting cost
a company?
The initial set-up for an electronic voting system for record
holders occasionally is paid by a service provider, but normally
costs a few thousand dollars (in comparison, the cost for ADP's
electronic voting system for beneficial owners is not directly
paid for by companies).
It can be costly without a service provider's help - particularly
for smaller companies that tend to have a smaller number of
record holders (so it will take longer for the overall annual
savings to justify the initial expense).
On an annual basis, a company can save 35-38 cents in return
postage for each stockholder who votes on the Web. Including
solicitation costs, it's estimated that companies spend 5 cents
for a Web-based vote and 11-17 cents for a telephonic vote.
If a company combines electronic voting with electronic delivery,
the savings can substantially increase. See more @ cost savings of electronic delivery.
Source: Most of these cost estimates were reported in "Internet
Voting and Distribution of Proxy Materials and More," The Corporate
Executive, March-April 1998. Under Rule 14b-2(c)(2), companies
must reimburse the reasonable expenses that record holders incur
in forwarding proxy materials to beneficial owners - the NYSE
and Nasdaq have rules that indicate which expenses are "reasonable."
What factors should a company consider
to ensure a voting system is reliable?
Most companies hire a service provider to assist with their
electronic voting - before hiring one, a company may want to
ask how it:
- authenticates shareholder identity,
- ensures confidentiality,
- maintains message integrity to ensure that the message
is not altered during transmission,
- ensures non-repudiation so that the sender and receiver
can't deny that the message was sent/received, and
- processes revoked votes, with a time stamp or electronic
confirmation system.
How can companies or their service
providers authenticate electronic proxy cards?
The most popular methods are:
- personal identification numbers (known as "PINs") that
are unique to each stockholder, and
- digital signature technology.
Although it's still unclear, it's likely that these methods
provide sufficient evidence about authenticity under applicable
state law.
In addition to the security of the system itself, a company
should consider whether the method of providing PINs is sufficiently
secure itself to consider the process adequately authenticated.
One possible solution is to use independent monitors to audit
the electronic voting system and process. Another solution is
for companies to have written guidelines about its process to
boost its image and integrity - and as potential evidence in
the event of litigation.
The SEC has urged companies to consider integrity, confidentiality,
and security issues when allowing personal information to be
transmitted electronically - and "personal information" arguably
includes how stockholders decide to vote.
Note that the SEC's guidance is flexible and does not dictate
the methods that companies must use to transmit information.
Source: The SEC's transmission of personal information guidance
is in Section II.A. of Release 33-7233 (October 5, 1995) and
Section II.B. of Release 33-7288 (May 9, 1996).
How can a company use an intranet
to allow employees to vote their employer stock?
To set up a voting system, a company should determine whether
it has more than one intranet and whether each of its employees
could have access to a Web page that allows voting.
If a service provider's server would host the voting Web page
- a company should ensure that its intranet would allow employees
to access the service provider's Web site.
In addition, FAQs that fully explain the electronic voting process
should be prepared and posted on the company's intranet.
If a company also wants to electronically deliver proxy materials
to its employees - it should survey how many employees have
access to its intranet. Some employees may not have access or
are too mobile to regularly check the intranet or the Web -
so they likely cannot be presumed to have consented to electronic
delivery. For these employees, companies still must deliver
paper copies (unless they first provide consents). See
more @ electronic delivery to employees.
How much lead time does a company
need to implement electronic voting on an intranet?
A significant amount, mainly to handle unpredictable issues
such as:
- if employees are identified by social security numbers,
how should employees that don't have social security numbers
be processed?
- if voting is allowed for employees who hold stock outside
of company-sponsored plans, will stock held jointly be voted
electronically on an intranet? This may be difficult since
one of the joint parties may not have access to the proxy
material if it is posted on an intranet (since non-employees
don't have access to the company's network).
For companies that also permit electronic delivery to employees,
additional issues include:
- if soliciting consents is necessary, how will consents
to electronic delivery of proxy materials be obtained? (e.gs.,
e-mail, postal mail, dividend stubs or combined with another
stockholder mailing)
- if consents are presumed, how will employees who do not
meet the criteria for presumed consents be tracked? will
consents from these employees be solicited?
Can companies use e-mail addresses
to deliver proxy material or to notify shareholders when proxy
material is available on a Web site?
Yes - but e-mail addresses change frequently, so companies should
establish a system to regularly confirm the validity of the
e-mail addresses.
In addition, the system should be able to track and accommodate
new employees who started employment after the last e-mail list
was compiled. See more @ electronic delivery
to employees.
Does a company need to obtain a legal
opinion before allowing electronic voting?
It depends on how clear the law is in the state where the company
is incorporated - and how risk averse the company is.
One matter to check is whether other companies incorporated
in the same state have allowed electronic voting and ask them
what was their legal basis to allow electronic voting.
How long should a company retain
a record of its electronic votes?
As long as it retains paper proxy cards under state law (but
state law does not apply to voting instructions) - or for a
sufficient period of time to be able to prove that it did receive
those votes, in the event that there is litigation regarding
their validity.
The SEC does not regulate the retention of proxy cards.
Companies should retain any consents provided by stockholders
to receive documents electronically - as well as any evidence
that serves to support the company's reasonable basis for believing
that a stockholder actually received electronically delivered
documents (since this would satisfy the SEC's electronic delivery
guidance - even in the absence of a consent). See more @ retention of consents to electronic delivery.
Who should handle e-mail or telephonic
questions regarding electronic voting?
Only trained personnel. Companies should consider giving a script
and a set of "frequently asked questions" to personnel to work
with (after these have been reviewed by counsel) and trained
to refer any other questions to a supervisor. However, the SEC
requires all scripts to be filed as additional soliciting material.
Answers should be limited to technical and procedural matters
or matters disclosed in the proxy statement. Otherwise, there
is a risk that any statements that could be considered a solicitation
of votes will constitute a proxy rule violation, particularly
e-mail responses to stockholder queries.
E-mail responses are considered a "writing" under the proxy
rules - so they may be required to be filed with the SEC as
additional soliciting material. See more @ what is a "writing."
H. Who is Allowing Electronic Voting
How is electronic voting growing?
Not as quickly as some commentators expected - but still quite
rapidly.
Electronic voting has grown from a handful of companies during
the 1996 proxy season - to nearly a thousand companies during
the 2001 proxy season for record holders and virtually all 15,000
public companies for their beneficial owners.
Which companies are allowing electronic
voting?
Many different types of companies allow electronic voting for
record holders - from blue-chip companies to small cap companies,
particularly technology companies. Companies disclose that they
permit electronic voting in their proxy statements. See more
@ disclosure regarding electronic voting.
Does electronic voting typically
impact whether a company will achieve a quorum?
No - most companies find that they obtain about the same level
of votes as they did before using electronic voting.
Although the ease of online voting has elevated the level of
employee voting (who historically tend not to vote) - the number
of stockholders who don't vote at all is growing (who tend to
be younger online investors that don't buy and hold).
How many stockholders use electronic
voting when allowed to do so?
During the 2001 proxy season, it is estimated that approximately
5.5% of beneficial owners voted on the Web and another 5.2%
voted by telephone, a 14% increase over 2000. The level of Web-based
voting has surpassed the level of telephonic voting within just
a few years.
Remarkably, the level of Web-based voting has surpassed to the
level of telephonic voting within just a few years.
Source: These statistics are noted in Broc Romanek, “Electronic
Voting and Electronic Delivery in the 2001 Proxy Season,” wallstreetlawyer.com
(August 2001).
How long has electronic voting been
around?
Telephonic voting has been around for over a decade - since
1992, institutional investors have routinely been electronically
providing voting instructions through ADP's proprietary software.
In 1996, the first companies offered Web-based voting to their
record holders. During that year, Bell & Howell became the
first company to allow direct online voting by record holders
- and First Chicago Trust Company (now Equiserve) established
an online voting pilot program, "Vote-by-Net," in which three
public companies participated (McDonalds Corporation, First
Chicago NBD, and Ameritech).
In 1998, ADP Investor Communication Services expanded its voting
system to offer companies the opportunity to allow its beneficial
owners to provide voting instructions on the Web - this led
to an explosion of beneficial owner electronic voting. See more
@ who are the electronic voting service providers.
Who pays for electronic voting?
Costs ultimately are paid by companies, through banks and brokers
acting as agents for the company.
Investors do not pay to vote - and companies can't require that
they do. See more @ how much does electronic voting cost.
I. Who are the Service Providers for
Electronic Voting
Who are service providers that have
electronic voting systems to assist companies?
Most major transfer agents and proxy solicitors have developed
electronic voting systems for their clients - and these systems
now allow both record holders and beneficial owners to vote,
including:
|
