Pursuant to Section 957 of the Dodd-Frank Act, the New York Stock Exchange submitted a proposal to amend NYSE Rule 452 and NYSE Listed Company Manual Section 402.08 to prohibit member organizations from voting uninstructed shares if the matter to be voted on relates to executive compensation.  The NYSE is requesting that the SEC approve the proposal on an accelerated basis.  In addition, the proposal will clarify that the rule includes not only the giving of a proxy but also the authorization of such proxy.

Currently, brokers must deliver proxy materials to beneficial owners and request voting instructions.  If the beneficial owner does not provide voting instructions by the tenth day preceding the meeting date, Rule 452 provides that a broker may vote on certain matters if the broker has no knowledge of any contest as to the action to be taken at the meeting and provided such action is adequately disclosed to stockholders, and does not include authorization for a merger, consolidation or any matter which may affect substantially the rights or privileges of such stock.  Additionally, the rule currently specifies 20 matters with respect to which brokers may not vote without instructions from beneficial owners. 

Therefore, prior to the enactment of the Dodd-Frank Act, member organizations were permitted to cast votes on certain matters, including some executive compensation proposals, without specific instructions from beneficial owners of the stock.  However, Section 957 of the Dodd-Frank Act requires the elimination of broker discretionary voting with respect to (i) the election of a member of the board of directors of an issuer (subject to limited exceptions), (ii) executive compensation or (iii) any other significant matter, as determined by the SEC, by rule.  The NYSE already prohibits member organizations from voting uninstructed shares if the matter voted on is the election of directors and the SEC has not at this time identified other significant matters with respect to which the NYSE must prohibit member organizations from voting uninstructed shares.  Accordingly, the NYSE is proposing to add a new Item 21 and accompanying commentary to NYSE Rule 452.11 and NYSE Listed Company Manual Section 402.08(B) to provide that a member organization may not give or authorize a proxy to vote without instructions from the beneficial owner when the matter to be voted upon relates to executive compensation. 

The proposed commentary to Item 21 clarifies that a matter relating to executive compensation includes, among other things, the items referred to in Section 14A of the Securities Exchange Act of 1934, as amended, including (i) an advisory vote to approve the compensation of executives, (ii) a vote on whether to hold such an advisory vote every one, two or three years, and (iii) an advisory vote to approve any type of compensation (whether present, deferred, or contingent) that is based on or otherwise relates to an acquisition, merger, consolidation, sale or other disposition of all or substantially all of the assets of an issuer and the aggregate total of all such compensation that may (and the conditions upon which it may) be paid or become payable to or on behalf of an executive officer.  In addition, the proposed commentary to Item 21 states that a member organization may not give or authorize a proxy to vote without instructions on a matter relating to executive compensation, even if such matter would otherwise qualify for an exception from the requirements of Item 12, Item 13 or any other Item under NYSE Rule 452.11 and corresponding Listed Company Manual Section 402.08.  Any vote on such executive compensation-related matters would be subject to the proposed new requirements of NYSE Rule 452 and NYSE Listed Company Manual Section 402.08. 

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