Our Primer On The “Proxy Committee Ballot” – And Why You Need To Have One
We have been planning to write this article - and add it to our series on “The Basics” - for a very long time…But midproxy season a reader called to ask, “Do you have a sample of a Master Ballot? My client is engaged in a proxy contest, and I know we need one, but I can’t find a sample anywhere.”
And, by golly, just a few weeks later, one of our CTH&A Inspectors of Election was sued personally by the loser in a proxy contest who failed to vote the proxies that ran to him and/or his other “proxy committee” members…by executing and handing in such a ballot…which case is still pending. (More on this, we promise, when the case is resolved.)
So what IS a “Master Ballot” – or as we prefer to call it, the “Proxy Committee Ballot” or better yet, the “Ballot of the Appointed Proxies”? And why does a company need to have one? And what should it say…and do?
As my colleague said in response to the formal challenge that was raised by the Company in question when no Proxy Committee Ballot was handed in by the dissident group – and in response too, to the lawsuit that was filed when he disallowed the dissident votes for the lack thereof - which he had no choice but to do when challenged - “Proxies are simply what the dictionary says they are: ‘Proxy cards’ authorize a person or persons (i.e. the shareholder’s ‘proxy’ or ‘proxy holder’ or members of a ‘proxy committee’ to whom the proxy is given) to take a specific action. Specifically, in the case of a shareholder meeting, the action is to vote as the proxy-giver instructs on the proxy card.” And – as he also noted, “Proxies do not vote themselves.” The designated ‘proxy’ (i.e. a person or persons if there is a “proxy committee”) must execute a Ballot in order to actually cast the votes that ‘run to them’ as proxy holders.”
What should this Ballot look like? It should look exactly the same as the Ballots that should be available at every shareholder meeting to allow attendees to vote their shares – and/or the shares that ‘run to them’ as ‘proxy holders’ – in person. And no problem at all using the very same form of Ballot, as long as one types or writes on it “Ballot of the Appointed Proxy” (or proxies) and one or more of the appointed proxies signs it.
Ideally, we say, in a proxy contest, both the “management choices” and the “dissident choices” should be placed on the same Ballot, along with clear instructions - as to the existence of two “slates” for example, and the extent to which they may be mutually exclusive - and as to how many votes can be cast for how many directors in total. But if each side agrees to supply its own Ballot, that is OK too – as long as the “rules of the road” are clear to meeting attendees, which is harder to assure, we think, with separate Ballots.
The best, and the only practical way to fill out a “Ballot of the Appointed Proxy” (or “Proxies”) – is to simply write on it, “Vote in accordance with the instructions received” – and then, of course, to have one or more of the designated proxy holders sign and date it. (This is because in a proxy fight – and even in uncontested meetings, where many proxy cards and ballots may be handed in before the polls close - it will usually take a while to fi e out exactly how many of the proxy cards and ballots that are handed in are actually valid.)
So why should a company have a Proxy Committee Ballot? It seems mighty obvious in contested meetings, but even in routine meetings, votes by proxy are simply not OFFICIALLY CAST until a Ballot is executed by the proxy holder and handed in before the polls are officially closed.
An important postscript: We always like to have the Proxy Committee Ballot signed, dated, marked with instructions to “Vote in accordance with instructions received” IN HAND before the meeting even begins – unless there is a proxy fi where the burden is on the two proxy committees themselves to hand one in. (At such meetings, Inspectors must be Judges and not Coaches.) That way, we know we have it, but also, if the meeting should be disrupted – say by a fi e alarm or other emergency – the Inspector can almost always certify that based on the vote already in hand, the business of the meeting can be concluded in accordance with the “instructions received” prior to the emergency.