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U.S. Sen. Charles Schumer wants the SEC to create “clear rules of the road” around the disclosure of vote tallies during proxy fights, a response to the confusion that reigned during a governance battle at J.P. Morgan.
Proponents of a non-binding proposal to separate Jamie Dimon’s dual roles as chairman and CEO of J.P. Morgan said they were denied access to vote counts in the week before a May 21 shareholder meeting. They said the decision to suspend the information flow was made by Broadridge Financial Solutions Inc., the company collecting the votes from shareholders. One proponent, Michael Garland of the New York City Controller’s Office, said his office stopped seeing tallies on May 8, when 56% of all votes cast at that point were in favor of the split.
By May 21, the final day of voting, the proposal won support from 32.2% of shareholders, down from 40% a similar resolution received a year ago. In the end there were 910.8 million shares cast in favor of the split, down from 1.1 billion last year, and 1.9 billion shares cast against the proposal, up from 1.6 billion last year, according to a filing Thursday. There were 15.4 million abstentions this year, up from 13.2 million the year before.
Schumer said in a letter to SEC Chairman Mary Jo White that he is concerned by reports that an industry trade group requested Broadridge cut off the information flow to proponents of the split CEO-chair proposal. That group, Securities Industry and Financial Markets Association, includes J.P. Morgan as one of its members.
In the absence of SEC rules, Broadridge “found itself in a bind” and “was obligated to respond to SIFMA’s request,” Schumer said in the letter, which was reviewed by The Wall Street Journal. “These disclosures should be made available to all interested parties in a fair and transparent manner, to ensure a level playing field in the proxy solicitation process,” the letter said.
SIFMA said in a statement it did not ask Broadridge to change its practices. “Rather, SIFMA sought to make an inquiry as to the basis or authority Broadridge was relying upon when it decided to share confidential proxy information with interested third parties,” said SIFMA executive vice president Cheryl Crispen. “When SIFMA spoke with Broadridge it informed us that it had already independently determined it would suspend its practice. The disclosure of proxy vote information to third parties before a final vote tally is an important issue for our members and the markets. We look forward to a broader review of this issue.”
Broadridge and the SEC declined comment.
The complaints died down in the final days prior to the May 21 meeting after an intervention by New York Attorney General Eric Schneiderman. The attorney general sent a letter to J.P. Morgan’s general counsel raising concerns about the flow of information, said a person with knowledge of the matter. J.P. Morgan agreed to ask Broadridge to once again provide results to the sponsors of the proposal, but Broadridge resisted, this person said.
Ultimately, J.P. Morgan agreed to give the tallies to groups that signed confidentiality agreements. The controversy “subsided,” Schumer said in his letter, but “I respectfully urge the commission to take any necessary action to ensure that proxy services providers such as Broadridge have clear rules of the road with respect to the dissemination of voting tallies.”
Garland of the New York City Controller’s Office said his office did not see tallies until about 36 hours before the May 21 meeting, too late to be of any strategic value.