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SEC Rejects Challenge to Proposal on Timely Vote DisclosureSubmitted by: Ted Allen, Publications

The Securities and Exchange Commission has rejected Consol Energy?s request to omit a novel proposal that seeks prompt disclosure of the vote results on shareholder proposals. In a Feb. 27 ruling, the SEC?s Corporation Finance Division turned down the Pittsburgh, Pa.-based coal company's challenge, clearing the way for a vote at the firm?s April 28 meeting.

The resolution, filed by two of New York City?s pension funds, calls on Consol to disclose preliminary vote results to resolution proponents within five business days of a shareholder meeting. In their supporting statement, the city funds argue that expedited disclosure of vote results ?could provide proponents and companies more time to consider appropriate actions, including meaningful dialogue, thereby increasing the opportunities for positive outcomes.?

In seeking to exclude the proposal, Consol argued that it would violate Regulation FD (which prohibits selective disclosure of material information), was vague and indefinite, and would further a special interest not shared by other investors. In response, the New York City funds pointed out that Regulation FD bars only the disclosure of non-public information that someone might trade on, and noted that it is unlikely that early disclosure of votes on compensation or ESG proposals would affect any short-term trading decisions. The pension funds also pointed out that Consol could avoid any potential violation by releasing the information to all investors via the company?s Web site, or by asking the proponents to agree not to trade on the information.

The resolution reflects the frustration experienced by proponents over the refusal of some companies to release vote results on a timely basis, even though the issuer often has preliminary results (because of electronic voting by many institutions) at the meeting. While many firms release preliminary results, some companies wait until their next 10-Q filing, which may be three months after the annual meeting, to disclose final vote results on proposals and director elections. It is not uncommon for companies with May meeting dates to decline to release their vote tallies until mid-August.

Other shareholders share these concerns over vote result disclosure. The Council of Institutional Investors has adopted a policy that urges issuers to release preliminary results at shareholder meetings and to disclose final tallies via a press release, 8-K filing, or a Web site announcement no later than one month after a meeting. As the council notes, ?early release of final tallies would cultivate an environment of open communication and board accountability to shareowners.?

Full post as published by Institutional Shareholder Services -- Corporate Governance Blog on March 17, 2009 (boomark / email).