Nobody said it was a democracy


It's proxy season, which means I've been reading through proxy statement after proxy statement.

The proxy voting rules for Allstate aren't very democratic. Scroll down to "How votes are counted and discretionary voting authority":

The thirteen nominees who receive the most votes will be elected to the open directorships even if they get less than a majority of the votes.

Okay, let's see, how many nominees are there? Oh, exactly thirteen.

How convenient.

In other words: These thirteen people will be elected to directorships regardless of what you do.

So of course I voted against all of them.

Later, I realized that I had fallen into their trap.

You see, the only way I could stop these people from becoming directors was to withhold my vote and attempt to hinder a quorum. Under these rules, a "no" vote is as good as a "yes" vote!

Allstate isn't the only company to rig their elections. Baxter and Wyeth (can't find proxy online) have similarly sham elections.

Comments (10)
  1. J. Daniel Smith says:

    I’ve taken to withholding my support for all directors and voting the opposite way the directors recommend on most ballot issues. Not that I own enough shares to make a difference.

  2. James Curran says:

    Doesn’t virtual every single US public corportation handle shareholder elections that same way? I don’t recall ever see a BOD slate with more nominees that positions.

  3. Raymond Chen says:

    Most of them say that a director must receive at least 50% of the vote to be elected, so that it’s possible to vote somebody out.

  4. Norman Diamond says:

    If you don’t like the way a company’s directors are behaving you can sell your shares. (And if the company isn’t a monopoly then you can refuse to buy its products.)

    How do you do that with a country? The candidate who gets the second-most votes becomes president, while of course no candidate received at least 50%.

    (Then the country invades others whose president got the most votes and more than 50%. Sure some of those other presidents are nasty, but that still doesn’t turn the invaders into a democracy.)

  5. Andre says:

    Do you even have the option of not voting? I’m not an expert on proxy rules, but in some cases if your shares are held in street name your brokerage firm may vote them if you don’t mail in the proxy.

  6. Norman Diamond says:

    In proxy rules that I’ve seen for US companies, the proxies have to obey your directions (e.g. withholding votes where you specified withholding), but the proxies are free to vote however they like on issues where you didn’t give directions. As far as I can tell, this allows additional issues to be raised and voted on by the proxies, even though the issues were not published in advance and not included on the proxy form.

  7. Matt Povey says:

    The Economist has a good article discussing these issues this week. Apparently the SCC is going to be changing the rules to make things a "little" bit more equitable. Quoting from memory, I believe it was written up as "a good start".

    No point linking to it as it’s subscription content. You’ll have to go buy a copy :).

  8. Not much of an election now, is it.

Comments are closed.